The Chinese are willing to use such underhand technology tactics for industrial espionage that it puts foreign firms at a disadvantage, Mr Schmidt says.
US firms will not retaliate because of tighter laws and a sense of "fair play", he claims.
In it he writes that China is "the world's most active and enthusiastic filterer of information" and "the most sophisticated and prolific" hacker of foreign companies.
He continues: "The disparity between American and Chinese firms and their tactics will put both the government and the companies of the United States at a distinct disadvantage" because "the United States will not take the same path of digital corporate espionage, as its laws are much stricter (and better enforced) and because illicit competition violates the American sense of fair play.
"This is a difference in values as much as a legal one."
The book has been co-written with Jared Cohen, the director of Google's 'Ideas' division, and the early drafts have been seen by the Wall Street Journal.
In recent days it has emerged the Washington Post, The Wall Street Journal, Bloomberg News and the New York Times have all had their systems hacked by the Chinese.
Mr Schmidt visited North Korea last month, in an attempt to encourage the regime to allow its citizens greater access to mobile technology and the internet.
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