The US has managed to dismantle the hacking efforts of a Chinese state-sponsored group that had been targeting key public infrastructure like the power grid and pipelines, says the FBI.
The FBI's director told lawmakers it had executed a campaign to shut down the "Volt Typhoon" group.
That group hacked into hundreds of older office routers to access data on US assets, Christopher Wray alleged.
The Chinese government is yet to respond to the accusations.
However, it has previously denied accusations of state-sponsored cyber warfare against other countries. It has, in the past, also accused the US of being "the world's biggest hacking empire and global cyber thief."
Mr Wray on Wednesday told a US congressional committee that China was deliberately laying groundwork to cripple key US infrastructure systems in the event of a hostile conflict.
The hacking efforts of the "Volt Typhoon" group had first came to light last May in the US, after Microsoft warned the group had targeted several public assets including hacking into government email accounts.
The FBI says the group targeted a broad sweep of the country's critical infrastructure including water treatment systems, the power grid, transportation systems, oil and gas pipelines as well as telecommunication networks.
Mr Wray said the China state-sponsored group had managed to install malware and take over hundreds of old and outdated routers connected to those infrastructure assets.
"The Volt Typhoon malware enabled China to hide, among other things, pre-operational reconnaissance and network exploitation against critical infrastructure," he told the US congressional committee on US-China competition.
He said this showed the hackers were preparing to "wreak chaos and cause real-world harm to American citizens and communities."
"If and when China decides the time has come to strike, they're not focused just on political or military targets," he added.
Cyber security experts in the US have previously warned that China is targeting infrastructure in order to lay the potential groundwork for the disruption of communications in the event of a conflict.
At Wednesday's hearing of the Select Committee on Competition Between the US and China, the chairman said this was "the cyberspace equivalent of placing bombs on American bridges and power plants."
The committee has been criticised by Beijing, which denies all allegations of cybercrime. The Chinese government has called on the committee to "discard their ideological bias and zero-sum Cold War mentality."
But Mr Wray outlined Beijing's resources dedicated to cyber warfare in detail and said China's hacking programme was bigger "than every other major nation combined."
He also said the FBI's cyber agents were outnumbered by their Chinese counterparts by 50 to 1.
