Story highlights OECD: China will overtake U.S. as world's biggest economy by 2016

Report says will be top economy after accounting for price differences

China is on track for fourth consecutive decade of rapid growth

Growth would gradually ebb as China catches up to more advanced economies

China is on track for a fourth consecutive decade of rapid growth and will overtake the US as the world's biggest economy in 2016 after accounting for price differences, according to a new report by the OECD.

Having slouched to 7.8 per cent growth last year, its slowest in more than a decade, China's economy will rebound to 8.5 per cent growth this year and 8.9 per cent next, the OECD said.

It forecast that China would average 8 per cent growth in per capita terms during the current decade, provided Beijing can implement a series of economic, financial and regulatory reforms, many of which are already in train.

"There is significant scope for further catch-up in China; China has a strong record with respect to several of the key factors for sustaining growth and is well positioned to emulate the record of earlier stellar Asian performers," the OECD said in its survey of the world's second-biggest economy.

The OECD noted that growth would gradually ebb as China catches up to more advanced economies, but its forecast is well ahead of Beijing's official target of 7 per cent average growth in the five years to the end of 2015.

JUST WATCHED Chinese president visits Moscow Replay More Videos ... MUST WATCH Chinese president visits Moscow 03:15

JUST WATCHED China's smog problem affects world Replay More Videos ... MUST WATCH China's smog problem affects world 03:40

"This is the one country that always lowballs their growth [targets]. At the OECD we always say we're going to grow half a per cent more, one per cent more than we actually do," said Angel Gurria, head of the Paris-based club of 34 global economies.

The Chinese economy is set to become as large as that of the US by around 2016 when assessed in purchasing power parity terms, which factor in price differences between countries, it added. The 2016 forecast is line with the OECD's previous estimates.

The OECD highlighted multiple risks to its outlook: a weak global economy, rising inflation, a rickety financial system, inequality and an ageing population.

But it noted that China already had made strides in cutting its reliance on external demand and that domestic rebalancing was also under way, with consumption a bigger driver of growth than investment since 2011.

Among a broad range of recommended reforms, the OECD drew particular attention to China's urbanisation push, saying the government needed to focus on building larger, more productive cities.

Although Chinese cities have expanded quickly, the country's urbanisation rate of 52.6 per cent is still below that of countries at similar levels of development. Transportation problems have also become severe. Average daily commuting times in Beijing -- which boasts one of the country's larger subway networks -- are 79 minutes, roughly double the OECD average.

Li Keqiang, China's new premier, has vowed to make urbanisation a centrepiece of his agenda. Along with more investment in infrastructure, the OECD said Beijing should give migrants to cities better access to schooling and that fiscal reforms were needed to ensure lower levels of government can fund more social services.

More controversially, the OECD also called for an overhaul of the Chinese land system. Farmers lack the right to sell their land, and the supply of land for residential development near urban areas is tightly controlled.

"Continued urbanisation is hampered by the rigid central planning rules governing the conversion of designated cropland into construction land, which partly reflect misguided concerns about food security," it said.