China needs to address 'very high' corporate debt - IMF

China needs to address escalating corporate debt to dodge a potential systemic risk to both itself and the global economy, a key International Monetary Fund (IMF) official has warned.

David Lipton, IMF's first deputy managing director, said corporate debt equated to about 145% of China's gross-domestic product (GDP). He described the ratio as "very high by any measure."

Overall, China's total debt was about 225% of GDP, including government debt of 40% of GDP and household debt at about 40%. Neither was particularly high by global standards.

IMF figures further showed that state-owned enterprises (SOEs) accounted for about 55% of the corporate debt, which far outweighed their 22% slice of economic output.

"These corporates are also far less profitable than private enterprises," Lipton told the China Economic Society Conference On Sustainable Development in China and the World.

"In a setting of slower economic growth, the combination of declining earnings and rising indebtedness is undermining the ability of companies to pay suppliers or service their debts."

Lipton further cautioned that banks were holding increasing numbers of non-performing loans.

"The past year's credit boom is just extending the problem. Already many SOEs are essentially on life support," he said in notes for a speech given Saturday, also pointing to China's slowing economy.

"Nonetheless, corporate debt remains a serious -- and growing -- problem that must be addressed immediately and with a commitment to serious reforms."

He emphasised the need for China to act quickly and effectively in dealing with both debtors and creditors, and tackle governance issues -- whether in the banking or corporate sectors -- that had created the underlying problem.

"While China is unique in many respects, it is not the first country to experience corporate debt difficulties. In fact, there is a range of international experience across advanced, transition, and emerging countries."