Future US-China competition in AI, Kania wrote, "could alter future economic and military balances of power".
Alphabet Inc's Executive Chairman Eric Schmidt, who heads a Pentagon advisory board, delivered a similar warning about China's potential at a recent gathering in Washington.
Schmidt noted that China's national plan for the future of artificial intelligence, announced in July, calls for catching up to the United States in the coming years and eventually becoming the world's primary AI innovation centre.
"I'm assuming that our lead will continue over the next five years, and that China will catch up extremely quickly. So, in five years we'll kind of be at the same level, possibly," Schmidt said told the conference, which was also hosted by CNAS.
An unreleased Pentagon document warned earlier this year that Chinese firms were skirting US oversight and gaining access to sensitive US AI technology with potential military applications by buying stakes in American firms.
In response, a bipartisan group of lawmakers in the US Senate and House of Representatives this month introduced bills to toughen US foreign investment rules.
The CNAS report noted the Chinese acquisitions and said Beijing faces hurdles to forging a domestic AI industry to rival the United States, including recruiting top talent.
Schmidt, however, expressed confidence in China's ability.
"If you have any kind of ... concern that, somehow their system and educational system is not going to produce the kind of people that I'm talking about, you're wrong," he said.
Battlefield 'singularity'
Artificial intelligence, which promises to revolutionise transportation with the advent of self-driving cars and bring major advances to medicine, is also expected to have military applications that could alter the battlefield.
Some machine learning technology is already being applied to a Pentagon project that aims to have computers help sift through drone footage, reducing the work for human analysts.
China's People's Liberation Army is also investing in a range of AI-related projects and PLA research institutes are partnering with the Chinese defence industry, the report said, citing publicly available documents.
"The PLA anticipates that the advent of AI could fundamentally change the character of warfare," the report said.
Kania acknowledged that much of her research was speculative, given the early stages of AI development and policies surrounding it in China and elsewhere.
Still, she said some PLA thinkers anticipate the approach of a "singularity" on the battlefield, where humans can no longer keep pace with the speed and tempo of machine-led decisions during combat, the report said.
The report quoted PLA Lieutenant General Liu Guozhi, the director of the Central Military Commission's Science and Technology Commission, warning "(we) must ... seize the opportunity to change paradigms."
Although Pentagon policy currently calls for a human role in offensive actions carried out by machines, it was unclear whether China's People's Liberation Army would adopt such a policy, the report said.
"The PLA may leverage AI in unique and perhaps unexpected ways, likely less constrained by the legal and ethical concerns prominent in US thinking," Kania wrote.
