WASHINGTON - The International Monetary Fund (IMF) said Tuesday that China's efforts to deal with excessive corporate debt and nonperforming loans are welcoming and encouraging.

"It is welcome that the (Chinese) government is focusing on the problems of excessive corporate debt and the corresponding burden on banks of impaired assets," IMF staff wrote in a technical note.

China has recognized the importance of de-leveraging and slashing overcapacity and overstock, against the background of rising corporate debt and bad loans. To wind down corporate leverage ratio and ease the bad loan risks on banks, China is considering detailed measures, which are likely to include debt-equity swap and bad-loan securitization.

Chinese Premier Li Keqiang has recently stressed on several occasions the importance of introducing debt-equity swaps to gradually bring down the corporate leverage ratio.

The IMF staff said that debt-equity conversions and bad-loan securitization can play a role in addressing problems, such as rising corporate debt.

"The success in addressing this issue is important for China's economic transition and, given its size and growing global integration, the world's economy at large," said the note.

The IMF staff suggested that debt-equity conversions should convert debt only of viable firms instead of allowing debt-laden "zombie" companies to stay afloat.

IMF's First Deputy Managing Director David Lipton has recently said at a forum that finding a way to improve corporate governance while reducing their debt to manageable levels through restructuring, and helping banks to deal with unpayable debt are the right things to think about.