"Rapid economic development, industrialisation and urbanisation have generated severe and growing pressures on the environment resulting in significant damage to human health and depletion of natural resources," OECD Secretary General Angel Gurria said in an introduction to a report on China's environmental performance.

He said "air pollution levels in some cities are among the worst in the world, one third of water courses are severely polluted and illnesses and injuries are associated with poor environmental and occupational conditions."

China is also the world's second-largest producer of greenhouse gases and is still the largest producer and consumer of ozone-depleting substances, the report said.

While Chinese authorities have introduced some regulatory and economic measures, "these efforts have not been sufficient to keep pace with environmental pressures and challenges generated by the very rapid growth of the economy," the Organisation for Economic Cooperation and Development said.

The report, which includes 51 policy recommendations, said energy consumption per unit of economic output was about 20 percent higher than the OECD average.

It also said that large-scale transfers of water from southern to northern China needed to keep up with growing demand.

Among the policy recommendations, the OECD prescribed higher prices for energy, water and other natural resources that would better reflect their scarcity.

"The under-pricing of energy, water and other resources needs to be addressed," it says.

That step should go hand-in-hand with compensating or mitigating the impact of price hikes on the poor.

An interministerial group should also be set up to examine how environment-related taxes might be restructured to help better achieve environmental policy objectives, it suggested.

For the past 15 years China has had economic growth of 10.1 percent per year and is now the fourth-largest economy in the world. It has set a target of quadrupling GDP between 2000 and 2020.

But despite pledges by authorities to clean up the environment, "economic priorities have over-ridden environmental concerns."

Among the other recommendations of the report are the need to improve governmental supervision of the environmental performance of Chinese corporations working oversees.

And the OECD calls on Beijing to prepare a "coherent national plan" on climate change.

It also calls for a better mix of incentives and sanctions for respecting environmental standards.

In addition, environmental expenditure needs to be made more efficient, strengthening the principles of "polluter pays" and "user pays," it said.

The OECD groups 30 industrialised nations, including the Group of Seven, Britain, Canada, France, Germany, Italy, Japan and the United States.

Although China is not part of the organisation, the OECD said it had used the same methods of examination as for member countries.

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