Zhou Xiaochuan, China's central bank governor, speaks on Sunday at a panel discussion at the annual conference of the Boao Forum for Asia. Photo: IC

China's central bank governor Zhou Xiaochuan warned on Sunday that the country needs to be vigilant for signs of deflation and said policymakers were closely watching slowing global economic growth and declining commodity prices.

"Inflation in China is also declining. We need to be vigilant about if this will go further to become some sort of deflation or not," Zhou said at the 2015 annual conference of the Boao Forum for Asia in Boao, South China's Hainan Province.

The central bank has cut interest rates twice since November and taken other steps to support growth, but economists believe it will be forced to take more aggressive measures in the coming months if prices and the economy weaken further.

Zhou also said China had a "clear direction" in terms of interest rate liberalization - a long-term goal - although he added it was difficult to put a clear timetable on the move.

He pointed to comments made in 2014 when he said the country's deposit rates were likely to liberalize in one to two years.

At the China Development Forum held in Beijing on March 22, Zhou said China could undermine structural reforms if it adopts an excessively loose monetary policy, while pledging to relax capital controls to help make the yuan currency fully convertible.

Zhou also said on Sunday that China hoped to work on streamlining regulations around foreign exchange this year and that through the adoption of new rules China would eventually be able to achieve capital account convertibility.

China is also "cautious" about the wider global slowdown, falling inflation and tumbling commodity prices, the central bank chief noted.

Earlier in March, China announced an economic growth target of around 7 percent for this year, down from 7.4 percent in 2014, already the slowest in 24 years.

The Chinese economy is highly resilient and has much potential, which provides enough room to leverage a host of policy tools, President Xi Jinping said Saturday while delivering a keynote speech at the opening of the forum in Boao.

Xi said China is shifting gear from high speed to medium-to-high speed growth, from an extensive model that emphasized its scale and speed to a more intensive one emphasizing quality and efficiency, and from being driven by investment to being driven by innovation.

"As the economy continues to grow in size, around 7 percent growth would be quite impressive, and the momentum it generates would be larger than growth in double digits in previous years," Xi said.