WASHINGTON - China's corporate debt risks are rising, but the costs of addressing potential losses on bank lending remain manageable, the International Monetary Fund (IMF) said Wednesday.

"Despite progress on economic rebalancing, corporate health in China is declining due to slowing growth and lower profitability," Jose Vinals, director of the IMF's monetary and capital markets department, said in opening remarks at a press conference on the newly released Global Financial Stability Report.

"This is reflected in the rising share of debt held by firms that do not earn enough to cover their interest payments. This measure, which we label 'debt at risk,' has increased to 14 percent of the debt of listed Chinese companies, more than tripling since 2010," Vinals said.

Risks are concentrated in five sectors: real estate, manufacturing, retail and wholesale, mining, and steel, where earnings relative to interest expense have fallen despite declining nominal interest rates, according to the report.

It estimates that bank loans potentially at risk in China amount to almost $1.3 trillion, which could translate into potential bank losses of $756 billion, or about 7 percent of the gross domestic product, if assuming a higher loss ratio of 60 percent on all corporate loans potential at risk.

"This number may seem large but it is manageable, given China's bank and policy buffers and continued strong growth in the economy," Vinals said. "Equally importantly, the Chinese authorities are aware of these vulnerabilities and are putting in place measures to deal with the overly indebted corporations."

The report suggests the Chinese government develop a comprehensive plan to further address the corporate debt overhang, accompanied by a strengthening of bank balance sheets and social safety nets, especially for displaced workers in overcapacity sectors.

While these estimates based on the sample of listed Chinese companies may overstate bank losses on corporate loans potentially at risk, the overall results showed that Chinese commercial banks are very resilient to shocks from problematic corporate loans with higher loss ratios, IMF executive director for China Jin Zhongxia told Xinhua.

"The report sends a positive signal that China's financial risks are under control," Jin said, adding that Chinese commercial banks could absorb such losses of $756 billion in one year without reducing capital, as the banking system had pre-tax profits of about $400 billion and bad debt provisions of $356 billion last year.