WASHINGTON — The International Monetary Fund (IMF) on Wednesday welcomed China's efforts to contain financial risks and suggested that China could take further measures to improve financial stability.

"They (IMF executive board directors) welcomed the significant steps taken by the People's Bank of China and regulatory agencies to strengthen financial sector supervision against a background of rapid financial sector growth and deepening," said the IMF in a statement after concluding the discussion of financial system stability assessment with China.

The IMF recognized the fast development of China's financial market amid the steady economic growth and referred to it as "a large, dynamic and interconnected financial system."

Chinese bank assets have increased to 300 percent of gross domestic product (GDP), and its equity and bond markets are now the second and third largest in the world, respectively.

According to the IMF assessment, China's regulation and supervision of its banking, insurance, and securities sectors show a high degree of compliance with international standards.

Meanwhile, the international financial institution warned that China's rapid credit growth, complex financial products and government's implicit guarantee posed threats to financial stability.

However, "(Chinese) authorities, including at the highest level, have made financial stability a top priority this year, and are taking steps to address vulnerabilities," said the IMF.

In order to improve oversight of systemic risks, the IMF suggested that China improve coordination among regulators and set up a high-level committee to monitor systemic risks.

This year, China has already created a financial stability and development committee under the State Council to monitor systemic risks and prevent financial disruption.

In order to guard against potential risks from illicit guarantee, the IMF also recommended that China increase capital and liquidity requirements on banks although they have met Basel requirements.

According to the IMF proposals, China could improve social safety net in order to offset impacts from China's efforts to wind down inefficient corporations.

The IMF began to conduct financial sector assessment of 29 economies with systemically important financial sectors on a mandatory basis in 1999. It first assessed China's financial sector in 2011, and the IMF assessment report released on Wednesday was the second one on China.