A sharp downturn in Europe could cut China's economic growth rate nearly in half, the International Monetary Fund said as it added to warnings about a possible severe global slowdown this year.

The IMF said Beijing should be ready to launch a multi-billion pound stimulus to ward off a slump in the world's second-largest economy.

The IMF is forecasting 8.2% growth this year for China but said that could be reduced by up to 4% if Europe's crisis causes large declines in credit and output.

"The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere," it said. "In the unfortunate event such a downside scenario becomes reality, China should respond with a significant fiscal package, executed through central and local government budgets."

China rebounded quickly from the 2008 global crisis and its economy expanded by a healthy 9.2% last year, but growth has declined as Beijing tightened credit and investment curbs to prevent overheating.

China's leaders have responded to a plunge in global demand by promising bank lending and other aid to struggling entrepreneurs.