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Reaping the benefits of sending tens of thousands of students and researchers to the United States, and a determined policy to buy and steal US technology, Beijing has "compressed the timeframe" for catching up, and now has "remarkable" capabilities, the official told journalists on condition of anonymity.
That is one of the key challenges for the United States, according to the new US National Intelligence Strategy.
In unveiling the strategy, Director of National Intelligence Dan Coats said it sets a focus for the US intelligence community in a time of rapid technological change.
"Today, we face the most diverse and complex set of threats that we have ever seen," Coats said in a speech to the intelligence community.
"The question then becomes what do we need to do now ... We must become more agile."
The strategy, the first drafted in five years, notes major changes in the world led by the weakening of the post-World War II global order, China's emergence as a global economic and military power, and the rise of cyber threats.
Coats named China, Iran, North Korea and Russia as key state threats, but said a broad range of non-state actors - jihadist groups, organised crime and others - are empowered by new technologies and could find common interests among themselves.
"Our greatest concern comes from those forces merging together," Coats said.
"You're going to see interests aligned," between non-traditional allies, warned the senior official from the Office of the Director of National Intelligence.
That goes for the United States as well, the official said: "We need partnerships with non-traditional partners, state, local and tribal."
US SPACE LEAD ERODED
At the time of the previous strategy in 2014, cyber attacks, along with threats to economic and financial security and to election security, were relative afterthoughts.
Now, they are at the forefront, underscored by persistent attacks from Russia and China in recent years - with cyber security paramount, according to the new strategy.
"Cyber hygiene is 90 per cent of the issue" in confronting these challenges, the official said.
The other area that deeply worries US intelligence is the loss of America's longstanding lead in space.
China and Russia especially are aiming for parity with the United States in space, but technology and commercialisation have given many countries and non-state actors space capabilities as well.
"We worry a lot about advantage," the official said.
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