China's "global information manipulation is not simply a matter of public diplomacy -- but a challenge to the integrity of the global information space," the report said.
"Unchecked, Beijing's efforts could result in a future in which technology exported by the PRC (People's Republic of China), co-opted local governments, and fear of Beijing's direct retaliation produce a sharp contraction of global freedom of expression."
The report, released by the State Department's Global Engagement Center, said Beijing spends billions of dollars annually on "foreign information manipulation" through the use of propaganda, disinformation and censorship, while promoting positive news about China and its ruling Communist Party.
At the same time, it said, China suppresses critical information that contradicts its narratives on contentious issues such as Taiwan, human rights and its flagging domestic economy.
"When you look at the pieces of the puzzle and you put it together, you see a breathtaking ambition on the part of the PRC to seek information dominance in key regions of the world," James Rubin, GEC special envoy and coordinator, told reporters.
"If we don't allow this information manipulation to be stopped, there's going to be a slow, steady destruction of democratic values," he said. "We don't want to see an Orwellian mix of fact and fiction in our world."
The report said China's approach to information manipulation includes promoting "digital authoritarianism," exploiting international organizations and exercising control of Chinese-language media.
Beijing, it added, had also acquired stakes in foreign media, sponsored online influencers and sought to co-opt foreign political elites and journalists.
In East Africa, for example, it alleged that China "paid for favorable coverage" in a local newspaper while concealing its sponsorship of content, and had sought to gain "significant control over Pakistani media."
These efforts could enable Beijing to "reshape the global information environment," the report said.
The report accused China of exploiting social media site WeChat to disseminate disinformation targeting "Chinese-language speakers residing in democracies," and Chinese technology giant ByteDance, the owner of TikTok, of seeking to "block potential critics of Beijing from using its platforms."
There was no immediate response to the report from Beijing.
The report comes after Secretary of State Antony Blinken on Thursday said China was seeking to surpass the United States as the "dominant power in the world -- militarily, economically, diplomatically."
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