Manufacturing is a "pillar industry", Keqiang said, and needs to see more innovation and start ups nationwide, Xinhua reported.
A lack of innovations, low added value and slow service are holding the sector back from the goals of the 'Made in China 2025' and 'Internet Plus' initiatives, Keqiang said.
Launched in March, Made in China 2025 is a ten-year action plan designed to turn China into a world manufacturing power. It is often described as China's version of Europe's Industry 4.0.
Internet Plus was launched in July and aims to integrate mobile internet, cloud computing, big data and the internet of things with modern manufacturing.
Less red tape is needed, along with better government services to create a good environment for entrepreneurship, Keqiang said. Government outsourcing, funding and support are needed to stimulate new businesses and generate growth, he said, according to Xinhua.
Keqiang gave the example of 3D printing as a growth area integrating information technology and manufacturing skills which could lead to a "deep reform of the whole industry", Xinhua said.
China's manufacturing index has remained at or around 50 since the start of 2015. A PMI reading below 50 indicates contraction in the sector, while above 50 indicates growth.
Small businesses in particular are struggling, with a PMI in July of 46.9.
