The US has ordered China to close its consulate in Houston, Texas, by Friday - a move described as "political provocation" by Beijing.
US Secretary of State Mike Pompeo said the decision was taken because China was "stealing" intellectual property.
China's foreign ministry condemned the move on Twitter, saying its embassy in Washington had received death threats.
Earlier, unidentified individuals were filmed burning paper in bins in the Houston building's courtyard.
Tensions have been rising between the US and China for some time. President Donald Trump's administration has clashed repeatedly with Beijing over trade and the coronavirus pandemic, as well as China's imposition of a controversial new security law on Hong Kong.
Then on Tuesday, the US Department of Justice accused China of sponsoring hackers who had been targeting labs developing Covid-19 vaccines. Two Chinese nationals, who allegedly spied on US research companies and got help from state agents for other thefts, have been charged.
Speaking at a press conference on Wednesday, Mr Trump said it was "always possible" he would order the closure of more Chinese consulates.
Why did the US say it was closing the consulate?
Mr Pompeo said the Chinese Communist Party was stealing "not just American intellectual property... but European intellectual property too... costing hundreds of thousands of jobs".
"We are setting out clear expectations for how the Chinese Communist Party is going to behave," he continued. "And when they don't, we're going to take actions that protect the American people, protect our security, our national security, and also protect our economy and jobs."
The consulate is one of five in the US, not counting the embassy in Washington DC. It is unclear why this one was singled out.
In a separate statement, the State Department accused China of engaging "in massive illegal spying and influence operations", interfering in "domestic politics" as well as having "coerced our business leaders, threatened families of Chinese Americans residing in China, and more".
How did China react to the order?
In a series of tweets, foreign ministry spokeswoman Hua Chunying described the reasons given by the US for closing the consulate as "unbelievably ridiculous".
She urged the US to reverse its "erroneous decision", or China would "react with firm countermeasures".
"While Chinese diplomats are promoting mutual understanding and friendship, the US embassy in China publicly attacks China's political system," she said.
"As a result of smears and hatred fanned up by the US government, the Chinese embassy has received bomb and death threats."
Chinese state media outlet the Global Times began running a poll on which US consulate to close in response. Beijing officials said the US has far more staff at its missions in China than vice versa.
The foreign ministry has posted a warning to Chinese students in the US, asking them to "be on guard" as "US law enforcement agencies have stepped up arbitrary interrogations, harassment, confiscation of personal belongings and detention targeting Chinese international students in the US".
In danger of a spiralling battle
This is clearly a significant development in the diplomatic sparring between Washington and Beijing.
The closure of the Chinese consulate in Houston comes soon after news emerged of the unsealing of a US indictment against two men accused of spying on US vaccine development on behalf of China's security services. It is not clear if the two episodes are linked. But it is clear that the Trump administration is determined to step up its very public calling out of Beijing.
In the midst of a presidential re-election campaign and with the US economy and society battered by the Covid-19 pandemic, Mr Trump has determined that there is political advantage in playing the China card.
It is hard to see how Beijing can avoid some equivalent response. The danger now is of a spiralling tit-for-tat battle, driven in part by US domestic considerations, which can only make the complex and developing tensions between the US and China even worse.
What is happening at China's consulates?
The first signs something unusual may be happening at the Houston consulate emerged on Tuesday, when people overlooking the building's courtyard noticed several bins on fire.
Footage shows people throwing what appears to be paper into the bins. It is not known who they were. People were later filmed appearing to pour water on the bins.
Emergency services were called to the building on Tuesday evening. However, the Houston police force said on Twitter officers "were not granted access to enter the building", but did see smoke.
Mr Wang did not directly address the fires in the consulate's courtyard, simply saying it was operating as normal.
Meanwhile, China's consulate in San Francisco has also come under scrutiny after the FBI alleged that a Chinese researcher accused of visa fraud for hiding her affiliation with the military had taken refuge there.
According to court documents filed this week, Juan Tang claimed she had not served in the Chinese military when trying to obtain a US visa, but an open source investigation uncovered photos of the University of California researcher wearing military uniform and a search of her home found further evidence of her affiliation with the People's Liberation Army.
"The FBI assesses that at some point following the search and interview of Tang on June 29, 2020, Tang went to the Chinese consulate in San Francisco, where the FBI assesses she has remained," reads the court filing, first reported on by the Axios news site.
China has not commented on the claims.
What is stoking tensions between China and US?
There are a number of flashpoints between Beijing and Washington currently. Some of the most serious are:
- Coronavirus: President Trump has repeatedly referred to Covid-19, the first cases of which were reported in Wuhan in late 2019, as the "China virus". He has also alleged it originated from a Chinese laboratory, despite his own intelligence officers saying it "was not manmade or genetically modified". In response, Chinese officials have suggested that Covid-19 might have originated in the US, without evidence.
- Trade: Mr Trump has long accused China of unfair trading practices and intellectual property theft, but in Beijing there is a perception that the US is trying to curb its rise as a global economic power. The US and China have engaged in a tit-for-tat tariff war since 2018 as a result of the dispute.
- Hong Kong: China's imposition of a sweeping new national security law in Hong Kong in June led the US to revoke the region's preferential economic treatment. Mr Trump has also signed a law to impose sanctions on officials who cracked down on rights. Beijing has accused the US of "gross interference" in its domestic affairs, promising it would retaliate.