The World Bank has cut its economic growth forecast for China this year from 8.5% to 8.2%, which would be its weakest level in more than a decade.
It cited sluggish US and European demand and a softening property market as reasons for the fall. The Chinese government's own growth forecast is currently 7.5% for 2012.
In its biannual East Asia and Pacific economic update, the World Bank said a slowing China will also drag growth in emerging east Asia to two-year lows this year. However, it warned Europe's continuing debt crisis could inflict even bigger damage on the region.
"With the European Union accounting for one third of global import demand, a recession there will inevitably take its toll on east Asia," the World Bank said.
It urged the Chinese leaders to rely on easier fiscal policy that boosts consumption rather than state investment, the Telegraph reports.
If governments and central banks act in time to stabilise activity, economies in the area should recover next year, the World Bank said. It added growth in east Asian economies would have risen to 5.2% this year, from 4.3% in 2011, if not for the cooling Chinese economy.
"The region's authorities should remain flexible to shift monetary policy gears should growth gain traction and inflationary pressures build up," the World Bank said.
If these measures are taken, it could mean China's growth rate rebounds in 2013 to an estimated 9.3%, according to the Bank.
The World Bank's lowered growth forecast for this year mirrors the International Monetary Fund's April estimate.
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