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Rising levels of debt pose "large risks" to China's economy, according to the International Monetary Fund (IMF).

In its first report since 2011 on China's resilience to shocks and contagion, the IMF said it still had concerns over imbalances in the world's second-largest economy.

A stress test on China's banks found four-fifths were vulnerable.

Beijing should put less emphasis on growth, beef up regulation, and improve banks' finances, the IMF said.

China's "big four" banks had adequate capital but "large, medium, and city-commercial banks appear vulnerable", the IMF said.

The stress tests covered banks holding 171tn yuan ($26tn; £19tn) in total assets, and 27 out of the 33 tested needed to raise more funds, despite already complying with Basel III regulations on bank capitalisation.

The IMF warned in October that China's dependence on debt was growing at a "dangerous pace".

China has seen robust growth over recent years, driven by debt-financed investment and exports. But in order to maintain high growth rates, and protect jobs and social stability, local governments had extended credit and protected failing companies, the report said.

China's debt has ballooned and is now equivalent to 234% of the country's total output, according to the IMF.

"The apparent primary goals of preventing large falls in local jobs and reaching regional growth targets have conflicted with other policy objectives such as financial stability," the report said.

The IMF acknowledged that authorities were already taking steps to contain the risks. But the Fund said China should adjust its economic strategy further.

"We recommend the authorities to de-emphasise the GDP" growth, said Ratna Sahay, deputy director of the IMF's Monetary and Capital Markets Department.

"Implicit guarantees to SOEs [state-owned enterprises] need to be removed carefully and gradually," she said.

The IMF also warned against the rapid development of new financial products, which it said could "very rapidly become large and popular and potentially a systemic risk".

The Fund says better co-ordination among supervisors was essential to contain the "grave" risks posed by innovative products.