Off-balance sheets activities have also slowed, with a recent Moody's report showing shadow banking "barely grew" from 64.4 trillion yuan in the first half of 2016 to 64.7 trillion yuan in the first six months of 2017. While some observers said credit had simply transferred to more regulated areas, others said moving away from the shadows is still a positive development.
The efforts to move away from shadow banking practices are set to continue. Beijing has proposed greater oversight on wealth management products, estimated to be worth some 29 trillion yuan ($4.39 trillion) outstanding at the end of 2016, with 80 percent off the books.
The proposals include prohibiting issuers from dipping into their own capital to compensate investors for losses — closing a loophole thought to have encouraged risky lending behavior and the growth of the shadow banking business.
The better economic backdrop has help companies to improve their cash flows and pay down some of their debt, experts said. The proportion of bad debt to total loans in Chinese commercial banks stayed steady at 1.74 percent at the end of September, unchanged from the second quarter, official data showed.
While some said China's official bad loans data may understate the actual situation, most experts whom CNBC spoke to agreed that asset quality is improving in Chinese banks.
And for the first time since the final quarter of 2011, China's debt-to-GDP ratio didn't increase and stayed unchanged at 255.9 percent in the second quarter this year, latest data by the Bank for International Settlements showed.
"Broadly, China is making progress in controlling its debt in various parts of the economy," said Christopher Lee, managing director in the corporate ratings group and chief ratings officer for Greater China at S&P Global Ratings.
"There is no one-size-fits-all way to deleverage and the government is utilizing a combination of incentives, deterrents and regulatory changes to facilitate an economy-wide deleveraging process," he added.