China is aggressively developing its power to wage cyber warfare and is now in a position to delay or disrupt the deployment of America's military forces around the world, potentially giving it the upper hand in any conflict, a panel of the US Congress has warned.

The panel's report discloses an alarming increase in incidents of Chinese computer attacks on the US government, defence companies and businesses. It notes that China now has both the intent and capability to launch cyber attacks "anywhere in the world at any time".

The conclusions reached in this year's US-China Economic and Security Review are far more dramatic than before. In 2007, it says, about 5m computers in the US were the targets of 43,880 incidents of malicious activity — a rise of almost a third on the previous year.

China's ability to wage cyber warfare is now "so sophisticated that the US may be unable to counteract or even detect the efforts", the report warns.
Given the dependence on the internet of key sectors of US public life, from the federal government and military to water treatment, social security and the electricity grid, "a successful attack on these internet-connected networks could paralyse the US".

The review's six Democrat and six Republican commissioners travelled to China, Taiwan, South Korea and Japan, and heard testimony from US intelligence agencies for their 393-page report.

There has been concern about Chinese computer espionage since 2002, when a large-scale series of cyber intrusions was launched on US military and government computer systems. In that attack, codenamed Titan Rain by the US, the Chinese downloaded up to 20 terabytes of data — twice the amount stored in the entire print collection of the Library of Congress.

Much of the activity is likely to emanate from groups of hackers, but the lines between private espionage and government-sponsored operations are blurred. Some 250 hacker groups are tolerated, and may even be encouraged, by Beijing to invade computer networks. Individual hackers are also being trained in cyber operations at Chinese military bases.

"China is stealing vast amounts of sensitive information from US computer networks, said Larry Wortzel, the commission's chairman.

According to the report, Beijing is investing huge resources in cyber and space missions because it sees America's computer networks and space assets as its "soft ribs and strategic weaknesses". The extent of its activities gives it the potential to beat the US in military conflict. Technologically, China has improved its range of satellites, so it can now accurately locate US aircraft carrier battle groups quickly, and from a great distance. Such information could be used to guide Chinese missiles to their targets.

The Chinese government has given no response to the accusations, but in the past has complained of cyber attacks coming in the opposite direction.

In addition to cyber warfare, the panel warns that Beijing is taking an increasingly aggressive stance in its rapidly developing space programme. The panel believes China has concluded that space will in future be an essential arena of warfare.

It notes that China tested an anti-satellite weapon last year, giving it the ability to destroy US satellites, in addition to its existing capability to "blind" them by using lasers. So far this year, 15 rockets and 17 satellites have been put into space.

China became the third country to explore space in 2003, after the Soviet Union and the US. Until 2002 Beijing opposed the militarisation of space, but it has quietly dropped its opposition since.

China's growing military power, running parallel to its increasing economic might, is likely to present challenges to the incoming administration of Barack Obama. The president-elect has said that "China is rising and it's not going away", although he prefers to characterise the US-Chinese relationship as one between "competitors" rather than enemies.