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 (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.
Lipton also addressed questions about the U.K.'s June 23 vote to leave the European Union (EU), stressing that an amicable split would benefit both parties, because uncertainty would hamper growth drivers.
"There is the risk and likelihood that the uncertainty that exists is going to lead people to postpone spending and investment until they know what, whether there'll be an amicable and cooperative approach, until they get some idea of what the new rules are likely to be, so it's best that the process proceeds well," he said.
Citing uncertainty caused by the Brexit vote, the IMF issued a new global growth forecast on July 19, in which it cut expected 2017 growth by 0.1 percentage point to 3.4 percent. The IMF expects the global economy to expand by 3.1 percent this year.
Still, the impending Brexit looked to be less of a worry than the fragile Italian banking sector, which was faced with non-performing loans (NPLs) estimated to total 360 billion euros ($400.7 billion).
"I think as long as the U.K. and EU approach Brexit with a cooperative spirit, the outcome can be a good one," Lipton said. "It's very hard to know exactly the state of Italian banks," he cautioned.
The European Banking Authority and the European Central Bank will release the results of new stress tests on major EU banks on Friday.
—Follow CNBC International on and Facebook.