High mortality levels and other health problems from China's air pollution are estimated to cost the country up to $US300 billion a year.
Premature deaths and health problems from air pollution cost China as much as $US300 billion ($A329.34 billion) a year, an official report says, calling for a new urbanisation model for the world's second-largest economy.
"As China prepares for the next wave of urbanisation, addressing environmental and resource constraints will become increasingly more urgent because much of China's pollution is concentrated in its cities," said the joint report by the World Bank and the Development Research Centre of the State Council, China's cabinet.
High mortality levels and other health problems from China's notorious air pollution are estimated to cost the country from $US100 billion to more than $US300 billion a year, said the report, which was 14 months in the making.
Writing in the Lancet in December, former Chinese health minister Chen Zhu cited studies showing air pollution caused up to 500,000 premature deaths a year in China.
Tuesday's report said the long-term consequences could include birth defects and impaired cognitive functions because young children and infants are severely affected by poor air quality.
China's rapid urbanisation over the last three decades - a key part of its economic boom - has avoided some common ills such as large-scale slums and unemployment, the report said.
"But strains have begun to emerge in the form of rising inequality, environmental degradation, and the quickening depletion of natural resources," it said.
Much of the new urban land was taken from farmers at prices often no more than 20 per cent of market values, and the amount of available farmland is now close to the minimum level necessary to ensure food security, said the report.
If current trends continue, an additional 34,000 square kilometres - an area about the size of the Netherlands - will be needed to accommodate the growth of cities in the next decade, it added.
China needs to reform the way it expands its cities and curb inefficient urban sprawl, which has sometimes produced ghost towns and wasteful property development, the report said.
On current trends China will spend $US5.3 trillion on urbanisation over the next 15 years - but with more efficient, denser cities the country could save about $US1.4 trillion, or 15 per cent of its gross domestic product last year, World Bank managing director Sri Mulyani Indrawati told a conference in Beijing on Tuesday.
The report proposed six areas for reform including more efficient land management that better benefits farmers, and adjustments to the "hukou" residence registration system to give migrant workers equal access to basic public services.
It also called on Beijing to step up its law enforcement on pollution.
China's Premier Li Keqiang vowed to "declare war" on pollution at the country's annual legislative gathering this month, and announced new measures to add to a raft of others issued over the past year.