The International Monetary Fund (IMF) on Wednesday spoke positively of China's efforts to rein in its rapid credit growth, but did call for more action to reduce the associated financial vulnerabilities, as the issue is still "very manageable".

In its latest Global Financial Stability Report released on Wednesday, the IMF said the world's financial system has become safer and more stable since its last assessment in October.

Tobias Adrian, IMF's financial counsellor and director of the monetary and capital markets department, said China is a key contributor to global growth but also has notable vulnerabilities, citing the fact that credit in relation to China's economy has more than doubled in less than a decade to more than 200 percent.

"A credit boom this big can be dangerous. The longer they last, the more dangerous they become," he said on Wednesday.

According to statistics, China has been an engine for the global economy, contributing to a third of global growth each year.

Adrian said the Chinese authorities continue to adjust policies to limit the growth of the banking and shadow banking systems. "They show some success in reining in credit growth. But in our view more needs to be done," he said.

He said the Chinese authorities are aware of the issue, adding that the authorities' progress and success is essential for global financial stability.

The report pointed out that while China has stabilized its near-term growth outlook, its policy efforts to contain leverage and financial risks remain constrained by the authorities' long-term growth objectives to

double the average income and size of China's economy by 2020. Achieving this requires ever increasing amounts of credit.

Matthew Jones, assistant director of IMF's monetary and capital markets department, believes the Chinese economy has sufficient buffers to any changing global financial conditions.

"We think these challenges are very manageable. But there is urgent need for action to ensure they remain manageable by reducing the vulnerabilities associated with rapid credit growth," he said.

While painting a more optimistic view than last October's outlook, the report notes that it is important for governments in the US, Europe, China and elsewhere to follow through on investor expectations by adopting the right mix of policies.

This means preventing fiscal imbalances, resisting calls for higher trade barriers and maintaining global cooperation on regulations needed to make the financial system safer, according to the report.

"In the United States, policy makers should ensure that measures to overhaul the tax system encourage companies to invest in new machines, computers and equipment - rather than engage in financial risk taking," Adrian said.

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