There is little doubt that China has matured into a full-spectrum cyber power. The Dutch Military Intelligence and Security Service recently assessed Beijing as “on an even footing” with the United States in offensive cyber capabilities, and a recent analysis concludes that across sophistication, scale, stealth, and strategy, China should be regarded as a peer competitor. The implications of this situation are significant given cyber’s increasing prominence for nation states as an operational domain, weapon, and space for economic competition. History has proven that traditional deterrence measures such as threatening punishment to prevent hostile action has certainly not produces any meaningful changes in Chinese spying behavior in cyberspace.

Indeed, any argument against such activities was undercut when the U.S. president acknowledged that U.S. did likewise against Beijing and at on par scale by stating, “We spy like hell on them.” Therefore, it comes as little surprise that when both sides engage in persistent cyber espionage, deterrence loses credibility. This necessitates the reframing of the strategic question from how to stop Chinese operations to how to outcompete Beijing in the technologies that will define 21st-century power.

Why Deterrence Falls Short

It is quite clear that China uses cyber operations to advance national interests it considers non-negotiable: gaining strategic decision-making advantage for economic, geopolitical, and national security objectives; technological self-sufficiency; and preparation for Taiwan contingencies, among others. These campaigns will continue regardless of U.S. offensive operations because the stakes are too high for China to abandon them. Simply, governments will do what is in their best interests to do.

The popular 2026 National Cybersecurity Strategy (NCS) emphasizes taking the fight to adversaries and promises cross-domain consequences for malicious activity with the intent of stopping attacks prior to execution and hindering the operational capabilities of threat actors in cyberspace. And while this may work against certain adversaries, this offense-first approach does not and will not work on those threat actors that refuse to be restrained for fear of punishment, and especially not those who are pursuing existential priorities to their national interests. This does not make the 2026 NCS uncredible, but it does rest on a flawed assumption that pre-emptive measures that temporarily impact adversary operations will have meaningful impact in altering their future courses of action.

The Real Contest Is in AI, Quantum Computing, and Semiconductors

The U.S. 2026 2026 Annual Threat Assessment identifies artificial intelligence (AI) and quantum computing as central to national security and calls China “the most capable competitor in the AI space,” with an explicit goal of displacing U.S. leadership by 2030.  While this assessment is spot-on, the policy response to this understanding has been contradictory. The U.S. has cut federal funding for technology Research and Development, thereby undermining the kind of investments the U.S. Intelligence Community cited as being necessary for the United States, as any dereliction in resource allocation potentially creates a strategic liability for the U.S. to remain competitive in these areas.

China, meanwhile, is pursuing an AI-governance offensive designed to shape international standards in its favor. Beijing seeks to embed its values (e.g., surveillance-friendly, state-controlled) into the global AI ecosystem, potentially locking in advantages that outlast any near-term U.S. lead. Given China’s penchant for playing the long game, this may work in their favor, especially as an increasing number of states – including Western ones like the United Kingdom and France – are gravitating toward these principles.

Currently, the United States maintains a slight lead over China in frontier AI development, but the gap is closing. Washington needs to concentrate on closing loopholes in export controls

in such areas as cloud access, third party smuggling, and the use of U.S. chipmaking technology

could help Washington maintain and even expand that lead.

Recommendations

Shift from Deterrence to Competitive Advantage. Abandon the belief that offensive cyber operations can compel China to stop activities Beijing considers essential. Instead, anchor strategy in regaining and sustaining a technological edge that plays to U.S. strengths while exploiting Chinese dependence on U.S. offerings.

Close Export Control Loopholes. Current controls have slowed Chinese AI development, but not at the rate that it needs to maintain a comfortable lead. Tightening restrictions must be a policy priority to exert maximum pressure to obstruct rapid Chinese advancement.

Restore Federal R&D Investment. AI and quantum computing are clear strategic areas for states in the 21^st Century. Reversing federal cuts demonstrates investment in technological that will be pivotal for not only national security but also help how they’re integrated into global infrastructure.

Contest AI Governance Internationally. China’s AI governance offensive threatens to normalize authoritarian-friendly standards globally. The United States should leverage its influence over internet governance, relationships with leading technology companies, and capacity to shape how they’re responsibly deployed across AI ecosystems.

Narrow AI Dialogue to Safety

AI dialogue with China should focus on safety, as opposed to export controls, coupled with increased pressure on technology access. This is essential in reducing opportunities for Beijing to close any gaps and gain ground on the United States’ narrow lead.

Outlook

The next several years will determine whether the United States maintains its lead in the technologies that underpin national power or steadily relinquishes gained ground to a peer competitor operating with strategic patience and whole-of-society mobilization. The path forward is not to out-hack China. It is to out-build, out-innovate, and out-govern—leveraging structural advantages in computing power, talent, and alliance networks while denying Beijing the tools to catch up. China will look to take advantage of policy contradictions and inconsistencies to make ground faster than current projections.

It’s critical to remember that any competition – including cyber – with China is a long game. The United States needs a strategy designed to win it, and more investment, not less,  is paramount to keeping Beijing in its rearview.