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Although China has made progress in streamlining administration, overhauling market regulation and optimizing government services, there is still much work to be done, said the premier in a speech released on Sunday.

For example, issues of territorial sovereignty may not be settled by compulsory arbitration. In January 23, 2013, one day after the arbitration process began, the Philippines issued a document that clearly stated that the arbitration was about sovereignty, Xu said.

The State Council will test innovative reforms in China's financial hub of Shanghai over three years, including exploring new financial service models and simplifying foreign investment rules.

"There remains relatively high downward pressure on the economy," the statement read, citing difficulty for brick-and-mortar businesses and growing market risks.

The meeting also pointed out that improvement in transportation infrastructure is badly needed in old revolutionary bases, ethnic minority areas, border areas and poverty-stricken areas.