The Chinese government must continue to strengthen economic policy in the face of the tough challenges being posed by the financial sector, the country's vice finance minister told CNBC on Wednesday.
"We still have many things that should be continually improved," Zhu Guangyao told CNBC.
"We must very closely watch the market, particularly the financial sector," he said, adding that total debt levels in the world's second largest economy should also be carefully monitored.
His words come after China's top brass pledged further reforms over the weekend while dispelling fears of a hard landing. On Saturday, Premier Li Keqiang announced a growth target of between 6.5 and 7 per cent for 2016 at the annual National People's Congress, down from last year's "about 7 per cent."
The pledges came amid concerns about the state of China's economy and Beijing's ability to manage its own economic transition to a more consumer-led economy. Such concerns have even roiled market sentiment around the globe and augmented some steep drops for equity markets since last summer.
In a report last year, the International Monetary Fund underlined the challenges being posed, highlighting that the "current growth model" was not an option for China.
"China still has the buffers and tools to prop up growth through continued reliance on credit and investment-fueled growth. However, over time, declining efficiency of investment would weigh on growth and further strain the repayment capacity of the corporate sector," the report stated.
It also highlighted a "no-reform scenario" that would require an increase in credit flow, which would boost the debt-to-GDP (gross domestic product) ratio in the country and lead to investment efficiencies
"Eventually financial conditions for the private sector would tighten, leading to a sharp reduction in investment, much slower growth, and increasing risk of disorderly adjustment," it said.
- CNBC's Huileng Tan contributed to this report.