Chinese workers making shoes and other products for Wal-Mart are working in "sweatshop conditions" because of the retailer's pressure on suppliers' prices, says a new report.

New York-based rights group China Labour Watch investigated five Wal-Mart supplier factories and found employees working in "illegal and degrading conditions".

Two of the factories illegally underpaid overtime wages and two withheld wages from workers who failed to meet production quotas, said CLW.

Workers in some factories were denied gloves on the grounds that it would slow production.

"Worst of all, two of the factories have rules forcing workers to lie to Wal-Mart auditors," said the report.

Last year Wal-Mart invited more than 1,000 leading suppliers to a conference in Beijing to outline its goals for a socially responsible supply chain.

However none of the factories visited by CLW had implemented the retailer's basic standards, said the report.

"As the world's largest retailer, Wal-Mart leverages its massive product orders to purchase goods at low prices, and workers suffer the financial burden."

Wal-Mart spokesman Richard Coyle told Reuters that the retailer had launched an investigation into the five factories mentioned in the report after learning of the allegations.

"We take reports like this very seriously, and we will take prompt remedial action if our investigations confirm any of the alleged findings," said Coyle in a statement.