The Chinese government has more weapons in its arsenal to boost its flagging economy, the world's second-largest, Premier Li Keqiang said Sunday at his once-a-year press conference.

Li -- who is second only to President Xi Jinping in the Communist hierarchy -- was speaking at Beijing's Great Hall of the People, where he also addressed topics including Sino-Japanese relations, air pollution and the future of China's notorious one-child policy.

Fears are mounting that Chinese expansion, a key driver of the global economy, may slow further in the wake of official data showing production, consumption and investment growth have fallen to multi-year lows.

China's economy expanded 7.4 percent last year -- the slowest pace in nearly a quarter of a century -- and Li earlier this month reduced the Asian giant's annual growth target to "approximately seven percent", the lowest since a similar goal in 2004.

Authorities have so far avoided big-ticket incentives to bolster growth like the unprecedented four-trillion-yuan (now $640 billion) stimulus package Beijing deployed at the height of the global financial crisis.

But Li signalled that more measures could be taken, telling reporters after the close of the Communist-controlled National People's Congress parliament: "We still have a host of policy instruments at our disposal."

Top Chinese leaders have said the economy is in a delicate transition away from decades of double-digit annual growth to a new, slower model that authorities say is more sustainable, a stage that they have branded as the "new normal".

Li dismissed theories that China's boom has seen it overtake the US to become the world's number one economy, describing such purchasing power parity calculations as a "misleading exaggeration".

"According to authoritative standards, China is still the second-largest economy in the world," he said, stressing that it remained "behind about 80 countries in the world" in terms of per capita GDP.

- 'Still a developing country' -

"China is still a developing country in every sense of this term," he added.

On China's notorious air pollution, which causes widespread public anger, Li told the assembled journalists that Beijing was falling short of expectations.

His remarks came one week after authorities blocked a scathing independent video on China's persistent air pollution, "Under the Dome," that racked up hundreds of millions of views before it was taken offline.

"The Chinese government is determined to tackle smog and pollution," Li said. "The progress we have made still falls short of the expectations of our people."

With the 70th anniversary of the end of World War II approaching, Li offered Japan a chance of improved relations -- but only if Tokyo's leadership honestly confronts the country's wartime aggression against China.

"It is true that the current China-Japan relationship is in difficulty," Li told reporters, calling perceptions of the war the "crux" of the problem.

"If leaders of Japan face history squarely and maintain consistency in how they view that part of history there will be a new opportunity for improvement and further growth of China-Japan relations," he added.

He also suggested that China is considering further changes to its family planning laws, after a relaxation in the one-child policy failed to see significantly more babies being born.

Li told reporters that Beijing would assess the reform along with "China's economic and social development situation" before any possible change in regulations.

"Both the pros and cons will be weighed," he said, in comments that were in marked contrast to past official declarations that family planning is a "fundamental national strategy" that cannot be "shaken".

Reporters attending the annual press conference are typically required to submit their questions in advance -- although this year, few mainstream foreign media outlets asked questions at the event.