The International Monetary Fund has issued its first broad review of China’s financial system. While applauding the country for its efforts in reforming its financial sector, it also offered a few pointers for improvement.

China has a sound financial system and has achieved remarkable progress towards a more commercially-oriented system. That’s according to the International Monetary Fund’s first Financial Sector Assessment Program review of China.

Meanwhile, the Washington-based international financial institution has said that further reforms are needed, especially in revamping the banking system so that China relies more on market mechanisms, in order to head off a steady build-up of financial sector vulnerabilities such as bad loans.

For some experts, however, the issuance of such a report alone signifies progress. Wang Songqi, deputy director of Finance Research Center of CASS, said, "What this means is that China’s financial sector has become much more transparent than before. This report can serve as a channel for outsiders to see the progress made in China’s reform efforts."

China’s central bank has said it found the overall report to be constructive but lodged objections to the time line and sequence of the IMF’s suggested reforms. It said the concrete timetable for reforms should remain flexible based on the country’s situation.

China is one of the 25 systemically important economies that have agreed to mandatory assessments at least once every five years. The Financial Sector Assessment Program is part of the IMF’s financial surveillance and the monitoring of the international monetary system.