David Lipton, the first deputy managing director of the IMF, said the growing debt pile held by state-owned enterprises (SOEs), accompanied by an increasing number of non-performing loans and "questionable loans," was a particular ongoing concern.
"In some areas they're very ambitious, the reforms are very significant … China's policies contribute a lot to the collective G-20 (Group of 20) effort so China is doing a lot [but] I think it's also fair to say that they're not yet doing enough," Lipton told CNBC on Sunday on the sidelines of the G-20 finance leaders meeting in Chengdu, China.
Lipton had said at an event in June that corporate debt in China stood at about 145 percent of gross domestic product, a high ratio "by any measure". SOEs accounted for about 55 percent of total corporate debt but just 22 percent of economic output, according to IMF estimates.
China understood the problem and was "trying to figure out what's the best way and best timing" to fix it, Lipton said on Sunday.
He added that Beijing's ability to take control of the country's changing economy was why worries about the country's slowdown and transition to a service-led economy had ebbed.
"It makes sense to manage it well and promote rebalancing, because a process that tries to resist rebalancing is more likely to see a build-up of debt and unprofitable enterprise that would ultimately cause a big problem," he said.