A cooling economy may cause both a regional slowdown and plunging commodity prices, the World Bank warned as worries that China is likely to land on a slower growth track are intensified.

The World Bank said Chinese gross domestic product was expected to expand 8.2 percent in 2012 – down from its previous forecast of 8.4 percent, according to its twice-yearly update on developments in the region.

Concerns over slowing growth have intensified after weak economic data for April, released last week, highlighted declining production, trade, investment and credit growth.

China's near-term policy challenge is to sustain growth through a soft landing. The ongoing slowdown is partly welcome to the extent that it reflects a deceleration in growth from above-potential levels, said the update.

"Fiscal measures to support consumption, such as targeted tax cuts, social welfare spending and other social expenditures, should be viewed as the first priority,” accoridng to the update.

At an executive meeting of the State Council on Wednesday, Premier Wen Jiabao vowed to place greater priority on maintaining steady growth.

Efforts should be taken to improve flexibility and vision and domestic demand must be boosted, he said.

Vice-Premier Li Keqiang, during a tour on Tuesday to East China's Jiangsu province, also urged greater consumption through more public spending on medical reform and more affordable housing projects.

China's longer-term challenge is to continue steering its economy towards a more sustainable path, according to the report.

Fiscal stimulus should be less credit-fueled, less local government-funded, and less infrastructure-oriented, unlike the four-trillion yuan ($630 billion) package in 2008, the bank suggested.

Monetary policy could also be adjusted on the margin, as bank reserve requirements could be tweaked further to ease the availability of credit. But cutting interest rates would better be reserved for further downside scenarios considering the positive real rates, said the report.

Nonetheless, given heightened levels of uncertainty, policy should remain flexible, with frequent but gradual adjustments as new data became available, the report said.

The World Bank predicted China could pull down growth rates in East Asia to 7.6 percent in 2012 from 8.2 percent in 2011.

Commodity exporters will also be vulnerable if China goes through a faster-than-anticipated slowdown, which will trigger a drop in prices, the bank said.