The admission that there are ongoing challenges in Hong Kong came during a visit to the special administrative province by China's number three official, Zhang Dejiang.
However he says there is no reason to change the way the system is currently operated.
"The 'One Country, Two Systems' works in the best interest of the country and Hong Kong. The central government will continue the implementation of the system firmly, Hong Kong society can be rest assured."
During the trip, Mr Zhang strived to emphasise Beijing's commitment to a more engaged and open relationship with Hong Kong.
He also criticised the actions of activists calling for greater Hong Kong nationalism and independence from China.
"Now there is a minority of people who reject the notion of one country and oppose the central government, and go as far as to ride the banner of Hong Kong independence. This isn't a local problem, but it is separatism under the name of localism."
Prior to a banquet on Wednesday, Mr Zhang, the head of the Standing Committee of the National People's Congress, met local MPs and officials, including pro-democracy politicians.
One of those is Chairman of the Civic Party, Alan Leong, who says while the meeting was a step forward, Mr Zhang's comments show his lack of understanding of the issue.
"He said that it seems that everywhere in the world that there is a craving for referendum in resolving problems, as if the demand for self-determination in Hong Kong is just part of a world trend."
Activist Leung Kwok-Hung speculated over his exclusion from the meetings.
"I am not surprised that I am not invited to go there and meet Mr. Zhang at the banquet. (Because) I don't think he can afford any kind of fair discussion face to face. What he has done in Hong Kong, his behaviour is like an alien king who needs to lock himself in a fortress."
Mr Zhang had earlier spoken at a conference urging Hong Kong's leaders to take advantage of Chinese President Xi Jinping's plan to build roads, railways and ports across Asia and Europe.
It's the first visit by a senior leader since tens of thousands of Hong Kong residents took part in unsuccessful street protests in 2014, demanding greater freedom from Chinese rule.
Fears of a repeat of those scenes prompted thousands of police officers to be deployed to keep the peace.
