Speaking in Beijing, the International Monetary Fund (IMF) deputy MD Lipton commented on the Chinese economy and said the country’s corporate debt is growing at a fast pace. He urged the authorities to speed up financial reform in order to head off the risk of systemic shock.

Lipton said China’s corporate debt is high and rising fast, and needs a concrete plan to address the issue. He said China needs to implement reforms with more urgency as the economy is facing growing vulnerabilities and there are fewer buffers to deal with any shocks. However, Lipton noted that the issue is “manageable”.

“Guarding against risks in the increasingly complex financial system requires action on multiple fronts,” Lipton said. “We see a clear need to address this issue in a more coordinated manner across regulators and markets.”

A recent IMF estimate that put the potential losses for China’s banks from bad corporate loans at 7 per cent of GDP was a conservative estimate that excluded exposures in the “shadow banking” sector. The IMF estimates that China’s corporate debt is now equivalent to 145 percent of gross domestic product, which it describes as “high by any measure.” The IMF expects China's economy to grow by around 6 percent in 2017.

"The risk was also that if the problem wasn’t dealt with speedily it could grow into a large crisis. Company debt problems today can become systemic debt problems tomorrow,” he said. And “systemic debt problems can lead to much lower economic growth, or a banking crisis. Or both.”