In an update to its World Economic Outlook on Tuesday, the International Monetary Fund warned that China's dependence on debt is growing at a "dangerous pace" and called for authorities to act to head off a brewing crisis in the world's second largest economy. IMF urged the country's leaders should kick on with vital reforms or risk a painful correction, adding that Beijing's "unsustainably high" growth goals were adding to the problem.

The IMF said China should rein in the credit growth and cut off support to "unviable" state-owned enterprises. Its warning follows weeks after a global central bank watchdog said China's banking sector could be facing an imminent debt crisis, fuelling worries a blowout could send tremors through the world economy.

China's total debt hit 168.48 trillion yuan ($25 trillion) at the end of last year, equivalent to 249 percent of national GDP, the Chinese Academy of Social Sciences, a top government think tank, has estimated. Last month the Bank for International Settlements (BIS) said a gauge of Chinese debt had hit a record high in the first quarter of the year. Its credit-to-GDP gap reached 30.1 percent in January-March, its highest level ever and far above the 10 percent level associated with risks.

The IMF left growth forecasts for 2016 at 6.6 percent, unchanged from July. For 2017 growth is expected to slow to 6.2 percent "absent further stimulus". Inflation is expected to rise to 2.1 percent this year and three percent over the medium term as slack in the industrial sector and downward pressure on goods prices diminish.