S&P Global Ratings, which cut China's sovereign credit rating earlier this month, said in a report on Friday that the country's debt growth will slow over the next five years, though it will remain at levels that could cause financial stress.
The ratings agency downgraded China by one notch on Sept. 21 to A+ from AA-, citing mounting economic and financial risks from a prolonged period of strong credit growth.
China's debt could rise 77 per cent to 302 trillion yuan ($45 trillion) over 2017-2021, though the pace of growth is slowing, S&P said in a report titled "China's Credit Growth: A Slowing But Still Aggressive Rhino".
"Our base-case projection is that China's average credit growth will drop a third to 12 per cent annually for 2017-2021," said S&P analyst Terry Chan.
"Despite this slowdown, the rate is still above our projection for nominal gross domestic product, implying that the system's high credit risks could still incrementally increase. Therein lies the danger."
S&P said after the downgrade that China's attempts so far this year to reduce risks from its rapid build-up in debt were not working as quickly as expected.
But it said in its latest report that efforts to curb the surging leverage of state-owned enterprises and local government financing entities should start to bear fruit.
The country's economic planner said on Monday that China will focus on lowering leverage ratios among state-owned firms and winding down of "zombie firms" to reduce leverage ratios and control debt risks.
S&P, in a separate report published on Friday, said China's ambitions to tackle high corporate debt have had only tentative results so far, most likely due to a lack of specific targets and time-frames on debt reduction.
Other analysts say more comprehensive structural reforms are needed. Much of the corporate debt in China is held by state firms, which are often bloated and less efficient than private companies and have easier access to ample cheap credit.
The International Monetary Fund warned this year that China's credit growth was on a "dangerous trajectory" and called for "decisive action".