A US grand jury has filed charges against five people in the People's Liberation Army's shadowy Unit 61398 for allegedly hacking American companies.
The criminal charges said that the hackers broke into US computers to gain a competitive advantage, hurting companies such as Westinghouse and the US Steel Corp as well as workers.
Attorney-General Eric Holder said the charges were the first of their kind against state actors and should serve as "a wake-up call".
"This administration will not tolerate actions by any nation that seeks to illegally sabotage American companies and undermine the integrity of fair competition in the operation of the free market," Holder told reporters on Monday.
"The indictment makes clear that state actors who engage in economic espionage, even over the Internet from faraway offices in Shanghai, will be exposed for their criminal conduct and sought for apprehension and prosecution in an American court of law," he said.
The charges, which US officials said came after several years of investigation, were filed against Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu and Gu Chunhui.
But Chinese authorities have called the charges "absurd" and a "fabrication".
The indictment, "based on fabricated facts, grossly violates the basic norms governing international relations and jeopardises China-US cooperation and mutual trust," foreign ministry spokesman Qin Gang said in a statement.
Beijing has asked that Washington "immediately correct its mistake and withdraw the 'indictment'," he said, noting: "The US accusation against Chinese personnel is purely ungrounded and absurd."
The spokesman said China would also suspend the activities of a bilateral cyber working group due to a "lack of sincerity on the part of the US," and reiterated that Beijing itself was a victim of "severe US cyber theft."
In the first-ever prosecution of state actors over cyber-espionage, a US federal grand jury indicted the five on charges they broke into computers to benefit Chinese state-owned companies, leading to job losses in the United States in steel, solar and other industries.
Prosecutors said that the officers belonged to Unit 61398 of the People's Liberation Army. A report last year by security firm Mandiant said that the unit had thousands of workers operating out of a non-descript, 12-story building on the outskirts of Shanghai where they pilfer intellectual property and government secrets.
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