China's economy to grow 5% this year after 'strong' Q1: IMF

However, the organisation said that risks are "tilted to the downside", including greater- or longer-than-expected property sector adjustment and increasing fragmentation pressures.

Meanwhile IMF's deputy managing director Gita Gopinath advised that China should scale back the use of industrial policies to support priority sectors, and remove trade and investment restrictions to raise domestic productivity and ease fragmentation pressures.

She said that in this context China should also continue its efforts to strengthen the multilateral trading system, particularly the World Trade Organisation.

On the housing market correction, Gopinath said the downturn was necessary to steer the sector towards a more sustainable path and this needed to continue. A more comprehensive policy package would facilitate an efficient and less costly transition while safeguarding against downside risks, she said.

Gopinath noted the priority should be to mobilise central government resources to protect buyers of pre-sold unfinished homes and accelerate the completion of unfinished presold housing, paving the way for resolving insolvent developers. Allowing for greater price flexibility, while monitoring and mitigating potential macro-financial spillovers, could further stimulate housing demand and help restore equilibrium, she said.

What they said: Gopinath said: "... [China's] authorities have focused on achieving high-quality growth by supporting innovation, especially in green and high-tech sectors, upgrading financial sector regulations, and introducing some policies to mitigate property and local government risks."

"However, a more comprehensive and balanced policy approach would help China navigate the headwinds facing the economy," she said.