An International Monetary Fund (IMF) official went on record this weekend as saying that China needs to quickly tackle its rising corporate debt problem to keep its economy on an even keel.

But IMF first deputy managing director David Lipton didn’t stop there. Lipton noted in less-quoted remarks that regulators needed to take further steps to nix further shocks to the system. He said they need to implement reforms with more urgency as the economy faces growing vulnerabilities. Without such preparation, he said, China would have fewer ways to react should the economy suffer some kind of shock.

“The near-term growth outlook has turned more buoyant due to recent policy support,” Lipton said at the end of a visit to Beijing.

“The medium-term outlook, however, is more uncertain due to rapidly rising credit, structural excess capacity, and the increasingly large, opaque, and interconnected financial sector,” Lipton said according to a copy of his prepared remarks.

While the government is continuing to stimulate the economy to help it reach growth targets, this is forcing up debt levels. With non-performing loans hitting 11-year highs, analysts are worried about the health of the country’s banking system.

In addition to fiscal reform, Lipton said China needs to guard against growing risks in its increasingly complex financial system by increasing coordination between different regulators and markets and strengthening funding resilience for both banks and other financial institutions.

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