Beating China to the market with new technology is the best safeguard for the United States, both economically and for national security, AT&T Communications CEO John Donovan told CNBC on Thursday.

"It's really important to a country's economy and to its security that when there's a new technology coming out, that you be first," Donovan said in a "Squawk Box" interview. Staying ahead of the Chinese is going to be "the best defense we can have," he added.

Donovan — who runs the bulk of AT&T's global telecom business, which includes operations in China — spoke at a time when tensions between the U.S. and the world's second largest economy are on the boil.

In a bombshell report Thursday, Bloomberg BusinessWeek said data center equipment run by Amazon Web Services and Apple may have been subject to surveillance from China via a microchip inserted during the manufacturing process of the hardware. Apple and Amazon have disputed the report.

China is also under intense scrutiny from President Donald Trump, who used accusations of intellectual property theft by the Chinese as a core argument for tough trade restrictions on Beijing.

According to the Commission on the Theft of American Intellectual Property, China's purported IP theft costs the U.S. $225 billion to $600 billion each year.

Meanwhile, AT&T is competing with Verizon in a big push toward 5G next generation wireless technology.

"This one is different, you know, in my 35-year career, I haven't seen one that was this game changing," Donovan said. "Networking in the 5G world is going to move to real time. It's going to fundamentally change architectures."

— CNBC's Kate Fazzini contributed to this report.