China's demonstrated anti-satellite capability makes it critical for Washington to work with Beijing to avoid an arms race in space, a leading US think tank said.

The Council on Foreign Relations report, China, Space Weapons, and US Security, urges the next US administration to update policy for "an era where space is a potentially far more contested domain than in the past, with few rules."

China's destruction of one of its defunct weather satellites in January last year showed the Chinese military's ability to attack satellites, the report said. The US and former Soviet Union demonstrated that capability in the 1980s.

"The risks inherent in space conflict, where vital US interests are at stake, suggest that preventing space conflict should be a major US security objective," said the report by technology and security consultant Bruce MacDonald.

"The US and China should both pursue diplomatic options to increase clarity and minimise misunderstanding on space-related matters, and reduce the chances of accidental conflict," it said.

Mr MacDonald, senior director of the Congressional Commission on the Strategic Posture of the United States, recommends a mixture of military programs to increase defences and diplomacy with China on the space issue.

"Both countries have interests in avoiding the actual use of counterspace weapons and shaping a more stable and secure space environment for themselves and other spacefaring nations," the report said.

Mr MacDonald said China's military dependence on space remained low compared to the that of the US, whose high reliance on space presents a vulnerability the Chinese People's Liberation Army could exploit if it chose to deploy offensive space capabilities.