A senior Chinese official has taken the unusual step of commenting on the internal affairs of ally North Korea.
Some portraits of Kim Jong-il have reportedly been removed
Vice Foreign Minister Wu Dawei stressed the country was politically "stable".
His comments follow unconfirmed reports that some portraits of the North's leader Kim Jong-il were missing, and of Chinese border troop movements.
Analysts say that verifying the situation in the secretive North is very difficult, and China's priority is to see its neighbour remain stable.
Mr Wu said he saw huge positive changes in the North during a visit in September.
"The politics are stable, the economy is developing, and the leaders are thinking seriously about economic reform," he told a press briefing in Beijing.
The minister denied South Korean media reports that 10,000 Chinese troops were preparing for a long deployment along the North Korean border, possibly to guard against an increase in North Korean refugees.
"Such reports are completely groundless. After reading these reports people will think it's true and this is extremely dangerous," he said.
Mr Wu's comments came as speculation continued over potential changes in the North, first sparked by reports from diplomats in Pyongyang that some portraits of North Korean leader Kim Jong-il had been taken down.
Some analysts said the move, if true, could simply indicate an attempt by Mr Kim to scale back the cult of personality which surrounds him.
North Korea's official media has denied the reports, calling them a US plot to overthrow its government.
Mr Wu added that he witnessed the effects of economic reforms, saying they had made the average North Korean much better off.
"The life of the North Korean people have been improved markedly. From what I saw and heard, I was deeply impressed," he said.
His comments contradicted a UN report on Tuesday that said the changes, under which farmers' markets have been allowed to start operating privately, have led to skyrocketing prices, depriving most North Koreans of enough to eat.
The international community is continuing to press Pyongyang to rejoin diplomatic talks on its controversial nuclear weapons programme.
Mr Wu, who is China's negotiator in the six-party talks, expressed cautious optimism about the talks' future.
The South Korean Unification Ministry also said on Wednesday that a UN official - Gabon Foreign Minister Jean Ping - who has just visited Pyongyang, received a "very positive message" from North Korea's leadership regarding talks.
The talks have been stalled since August.