In an address to more than 2000 delegates before he hands over power, Mr Hu acknowledged anger over corruption and issues like environmental degradation had undermined support and led to surging numbers of protests.
He promised political reform but ruled out copying Western-style democracy, and stressed the need to strengthen the armed forces and protect sea territory amid disputes with Japan and south-east Asian nations.
On corruption, Mr Hu said: "If we fail to handle this issue well, it could prove fatal to the party, and even cause the collapse of the party and the fall of the state."
Hu was opening a week-long congress at Beijing's Great Hall of the People that will usher in a once-in-a-decade leadership change in the world's second-largest economy.
The run-up to the carefully choreographed meeting, at which Mr Hu will hand over his post as party chief to anointed successor Vice-President Xi Jinping, has been overshadowed by a corruption scandal involving one-time high-flying politician Bo Xilai.
The party accused him of taking bribes and abusing his power to cover up his wife's murder of British businessman Neil Heywood in the south-western city of Chongqing, which he used to run.
While Mr Hu did not name Mr Bo, once considered a contender for top office himself, he left little doubt about the target.
Mr Hu said: "All those who violate party discipline and state laws, whoever they are and whatever power or official positions they have, must be brought to justice without mercy."
The congress ends next week, when the party's new Standing Committee, at the apex of power, will be unveiled. Only Mr Xi and his deputy Li Keqiang are certain to be on what is likely to be a seven-member committee, and about eight other candidates are vying for the other places.
The congress also rubber-stamps the selection of about two dozen people to the party's Politburo, and approves scores of other appointments, including provincial chiefs and heads of some state-owned enterprises.
Mr Hu named healthcare, housing, the environment, food and drug safety and public security as areas where problems had increased markedly.
While Mr Hu promised "reforms to the political structure" and more encouragement of debate within the party, he gave no hint China would allow broader popular participation.
He said: "We will never copy a Western political system."
While Mr Hu will step down as party leader, Mr Xi will only take over state duties at the annual meeting of Parliament in March.
Weeks after anti-Japan riots swept city streets following a row over disputed islands, Mr Hu also said China should strengthen the armed forces, protect its maritime interests and be prepared for war in the information age.
He said: "We should enhance our capacity for exploiting marine resources, resolutely safeguard China's maritime rights and interests and build China into a maritime power."
The Government has tightened security in the run-up to the congress and has either jailed or expelled dozens of dissidents.
Meanwhile, a top Chinese official has said there is no evidence Mr Heywood was a spy.
Mr Bo's wife, Gu Kailai, was convicted of poisoning Mr Heywood.
Asked about a report that Mr Heywood was an informant for British intelligence, Vice-Premier Zhang Dejiang said evidence to date did not show he was a spy.
Foreign Secretary William Hague said he was "not an employee of the British Government in any capacity".