It said networks owned by the US government, defence contractors and US businesses were the focus of Chinese cyber attacks.
"China is aggressively pursuing cyber warfare capabilities that may provide it with an asymmetric advantage against the United States," the commission said.
"In a conflict situation, this advantage would reduce current US conventional military dominance."
US decline
 |
| China's space programme has potential military uses, the commission said [Reuters] |
The commission's report was released on the same day that a separate study by US intelligence agencies forecast a decline in US economic and political dominance over the next two decades, with rising powers such as China and India competing for influence and access to scarce resources.
In its report, the commission also warned that China's space programme posed a growing security challenge and potential threat to the US.
"Although some Chinese space programmes have no explicit military intent, many space systems - such as communications, navigation, meteorological, and imagery systems - are dual-use in nature," the report's authors warned.
The report quoted Cai Fengzhen, an officer in China's People's Liberation Army, as saying that the "area above ground, airspace and outer space are inseparable and integrated. They are the strategic commanding height of modern informationalised warfare."
"If this becomes Chinese policy," the report said, "it could set the stage for conflict with the United States and other nations that expect the right of passage for their spacecraft."
'Heavy-handed'
The commission, made up of six Democrats and six Republicans, was set up in 2000 to advise, investigate and report on economic and national security issues between China and the US.
In its report, running to almost 400 pages, the panel also criticised China for exercising "heavy-handed government control" over its economy and "continuing arms sales and military support to rogue regimes" such as Sudan, Myanmar and Iran.
On the economic front, it said "China relies on heavy-handed government control over its economy to maintain an export advantage over other countries".
As a result, the report said, "China has amassed nearly two trillion dollars in foreign exchange and has increasingly used its hoard to manipulate currency trading and diplomatic relations with other nations".
But it was China's expanding space and computer warfare programmes which took the bulk of the commission's attention - referring to Chinese capabilities in these fields as "impressive but disturbing".
The commission recommended that congress step up funding across a range of areas including "additional funding for military, intelligence and homeland security programmes that monitor and protect critical American computer networks".
China has yet to officially comment on the commission's findings, although it has responded to past reports by saying it does not try to undermine other countries' interests and seeks healthy ties with the US.