BEIJING - A leading Chinese investment firm raised its forecast for China's economic growth in 2018, citing stronger external demand and strength in consumption and manufacturing investment.

The China International Capital Corp (CICC) raised its forecast for China's 2018 real GDP growth to 7 percent year-on-year, up from a previous estimate of 6.9 percent, according to a report from the company.

An expected tax cut in the United States will boost external demand for China, contributing to faster export growth, according to Liang Hong, chief economist with the CICC.

Stronger-than-expected external demand growth in 2018 will add to the inflationary pressure, and the consumer price index is predicted to rise 2.6 percent year-on-year in 2018, up from 2.5 percent in the previous estimate, according to the report.

The investment firm is also optimistic about China's domestic demand, citing growth potential in consumption and investment.

"Consumption growth will likely pick up on the back of rising disposable income growth, especially that of lower-income households that have higher consumption propensity," Liang said.

Meanwhile, manufacturing investment growth is expected to accelerate, driven by a notable rebound of corporate investment returns, Liang said.

The firm also expected acceleration in property investment growth and resilience in actual infrastructure investment activity this year.

For 2019, the CICC expected the real GDP growth to remain robust at 6.9 percent.

With higher expectations for growth and inflation, the CICC forecast that China's central bank will raise the benchmark deposit and lending rate by 25 basis points this year.

China's GDP expanded 6.9 percent year-on-year in the first three quarters, above the government's yearly target of 6.5 percent. The official GDP number for the whole year of 2017 is scheduled to be released next week.