US military, intelligence and national security officials say China is hiding malicious computer code deep inside networks that control electricity, communications and water supplies that feed US and global military bases. The US government and Microsoft attribute recent malware attacks to a Chinese state-sponsored actor, but the government did not reveal the details of the attribution.

The Chinese Embassy in Washington issued a statement denying its involvement in hacking. Haoming Ouyang, a spokesman for the embassy, said that 'Chinese government departments face numerous cyber attacks every day, most of which come from sources in the US'.

Over the past two months, more than a dozen US officials and industry experts said that the Chinese attempt goes far beyond telecommunications systems and that the US government's attempt to track down and root out the codes has been going on for some time. Most of them spoke on the condition of anonymity. The discovery of the malware has prompted a series of Situation Room meetings at the White House in recent months. Senior officials have been trying to understand the scope of the problem and plan a response.

Why does it matter?The revelation of the malware operation comes at a particularly tense moment in Washington-Beijing relations. Beyond technological competition, mutual accusations of malicious activity in cyberspace have driven much of the tension in the relationship.