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SINGAPORE, Dec 11 (AFP) - The Chinese economy faces a pressing need for more reforms if it wants to avert a sharp slowdown in the face of waning global demand, a report by a global bank said.

Specifically, Beijing has to overhaul the national tax structure and reduce spending on public infrastructure, which has been the growth driver for several years, Dutch-based ABN Amro said in a report received Tuesday.

"We believe the government can afford its current pro-active fiscal policy," said the bank.

"But economic growth largely driven by government infrastructure spending will not be the optimal path for China's economic development," it said.

Now that it is a member of the World Trade Organisation (WTO), Beijing needs to seriously reform the country's tax structure to bring it in line with that of other WTO nations, ABN Amro said.

"Tax and fee reforms have long been on the central government's agenda. China's WTO accession will probably speed up the implementation," said the bank.

"Ultimately, China needs a clear and transparent taxation system, which is able to optimise the distribution of income between the government (central and local government) and individuals," it said.

The bank said Beijing should also consider cutting taxes which will reap long-term benefits despite a short term reduction in government revenue.

"A tax cut will probably reduce revenue but will also enhance domestic demand and create investment opportunity for the private sector, which in turn will increase future tax revenue," said the bank.

Cutting taxes would be better than public spending on infrastructure projects in terms of economic efficiency after several years of pump-priming through fiscal stimulus programmes, said ABN Amro.

"Efficiency is of paramount importance in China's resource allocation," said the bank.

"The simplest way to do this is to put money into people's pockets, as people are wiser spenders than the government. This is indeed the foundation of a market economy." 

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