China’s debt risks are under control as enhanced supervision has taken effect, but regulatory bodies need to enhance coordination to tackle risk points, an economist with a government think tank said on July 25.

“The overall debt risks remain under control, but regulatory bodies need to enhance coordination to deal with risks emerged in sectors such as off-balance sheet activities,” said Li Yang, director-general of the National Institution for Finance and Development with the Chinese Academy of Social Sciences.

Risks have been piled up in recent years in sectors such as real estate, according to Li.

Central government debt in 2016 stayed the same compared to the previous year, while local government and household debt went up by 9 percentage points and 5 percentage points, respectively, compared to 2015, according to the report by the National Institution for Finance and Development at the Chinese Academy of Social Sciences.

Echoing his remarks, Luo Ping, a senior researcher at the institute, said the current supervision mechanism needs to be improved.

He suggested that the top financial regulatory authorities should be able to establish new departments to deal with the risks involved in financial products.

“The good news is that the policymakers have become aware of the risks,” said Luo.

Earlier this month, the State Council decided to establish a committee overseeing financial stability and development.

“The step signals that the central government has elevated the importance of preventing risks to the national level,” said Luo.

Efforts to reduce risks such as through lower excessive credit started to bear fruits, he said.

Although China’s debt to GDP ratio continued to increase in 2016, it grew at slower pace, the report said.

Deleveraging contributed to the slower growth of debt in 2016, according to the report.

Debt over GDP in the financial sector was 97 percent in 2016, up only 9 percentage points compared to 2015, according to the report.

Debt over GDP increased by 11 percentage points from 2014 to 2015, the report said.

By the end of 2016, money invested in financial products hit 29 trillion yuan ($4.3 trillion), among which 70 percent was invested in non-financial economic activities, according to the report.

Liu Xiaochun, president of Hangzhou-based CZBank, said the commercial banks have gradually switched from pursuing high investment returns from financial products.

“How to guide money to support the non-financial sector becomes one of our major tasks,” he said.

The debt of State-owned enterprises went back to relatively the same level as in 2007, the year before the global financial crisis, as the central government’s efforts to encourage cutting leverage started to bear fruit, according to the report.