Jose Vinals, IMF financial counsellor and Director of the Monetary and Capital Markets department, discusses the rising risks at a press conference. [Photo: CRIENGLISH.com]

The International Monetary Fund has warned of a repeat of the turbulence seen on the markets earlier this year, and of increasing risks to global growth.

But it praised China for its economic rebalancing measures, while warning of the risks posed by corporate loans.

The observations were made in the IMF's latest Global Financial Stability Report which was released on Wednesday.

The IMF report indicated that the risks to global financial stability increased over the last six months due to a number of factors, such as slower economic growth and concerns over China's economy as well as declining confidence in policy traction.

But according to the Fund's financial counsellor and Director of the Monetary and Capital Markets department, Jose Vinals, the situation now appears significantly better. But he warned that more needs to be done to avoid a repeat of market turbulence in the future.

"If not, market turmoil may recur and intensify, and could create a pernicious feedback loop of fragile confidence, weaker growth, tighter financial conditions, and rising debt burdens. This could tip the global economy into economic and financial stagnation."

Vinals called for a collective approach to policy making to tackle these global challenges. He particularly urged European banks to address their business models and complete a banking union to weather crisis legacies.

In China, the IMF noted that the country was on course of a complex transition to a slower and more balanced pace of growth, and a more market-based financial system. But the report noted that corporate bank loans posed a potential risk that could amount to nearly 1.3 trillion U.S. dollars.

Vinals said these loans could translate into bank losses of approximately 7 percent of GDP.

"This number may seem large but it is manageable, given China's bank and policy buffers and continued strong growth in the economy."

IMF experts have noted China's efforts in this regard, saying the debt for equity measures taken by the government were proving effective, and called for an even more ambitious policy agenda.

This is the second IMF report on China's financial stability. The last China survey was five years.