China needs to solve its real estate crisis as soon as possible, the International Monetary Fund's fiscal affairs chief Vitor Gaspar said on Wednesday,

Gaspar said China's debt was increasing by about two percentage points of gross domestic product each year, but Chinese authorities had enough policy space and options to control deficits and debt.

The IMF's new Fiscal Monitor said China's ongoing property sector downturn was exerting "a significant drag on growth," weighing on financial market and consumer sentiment, and putting strains on local government finance.

(Reporting by Andrea Shalal)