BEIJING - Morgan Stanley raised its forecast on the pace of China's economic expansion for this year and 2019 in its latest research note, saying growth had become more sustainable and less reliant on credit.

The New York-based investment bank expects China's gross domestic product (GDP) to rise 6.6 percent year-on-year in 2018, up from its previous projection of 6.5 percent. Its forecast for 2019 improved from 6.3 percent to 6.4 percent.

Robin Xing, chief China economist with Morgan Stanley, attributed the upgrade to better-than-expected performance for the year to date.

"Growth remained strong and beat expectations at the start of the year, as resilient external demand, consumption and property investment offset slower infrastructure investment," Xing said.

China's GDP went up 6.8 percent from a year ago in the first three months of 2018, extending the economic strength of last year, when China's GDP picked up pace for the first time in seven years.

The National Bureau of Statistics on Tuesday released an array of economic indicators for April, with many surpassing market expectations. China's industrial output expanded 7 percent, faster than the 6-percent rise in March. Retail sales and fixed-asset investment also remained solid.

"As growth is turning more sustainable and less credit reliant amid improving productivity, we are confident that China can achieve a near-stabilization in the debt-to-GDP ratio by the second half of 2019 and attain high income status by 2025," Xing said.

China's inflation will pick up but stay benign this year, with 2.4-percent growth in the CPI and 3.4-percent growth in the PPI, according to the research note.

Morgan Stanley expects China's imports and exports to remain steady and the current account surplus to see a lesser share in GDP, dropping from 1.4 percent last year to 0.8 percent in 2018, and 0.5 percent in 2019.

While the proportion of the trade surplus will be very little, cash inflows through the capital account are on the rise as China has moved swiftly to open its financial sector, including bonds and equities, Xing said.

Foreign ownership in China's domestic bond market climbed to around 3.2 percent on Feb 18, up from around 1.8 percent two years ago, according to Morgan Stanley.