The International Monetary Fund on Wednesday raised China's GDP growth forecast for 2017 to 6.7 percent, compared to its previous forecast of 6.6 percent.

"China continues to transition to a more sustainable growth path and reforms have advanced across a wide domain," said First Deputy Managing Director of the International Monetary Fund David Lipton on Wednesday in Beijing. "We are confident that China will once again find its way through the challenges ahead."

He said China has the potential to safely sustain strong growth over the medium term.

The IMF now project growth of 6.7 percent in 2017 and average annual growth of 6.4 percent between 2018-20 period.

His comment came after the IMF staff members visited Beijing and Lanzhou from June 1 to 14 to conduct discussions on the annual Article IV review of the Chinese economy.

Official data released by the National Statistics Bureau on Wednesday shows industrial output and retail sales grew at a steady pace in May.

Looking ahead, Lipton said China needs to deep reforms to transition from the current growth model that relies on credit-fed investment and debt.

He said the efforts made by the governments in the past two months to regulate debt level can be described as important and special.

He said debt control measures will have some effects on credit growth in the future, but the key suggestion for China is to regulate allocation of credit, to make sure credits go to regions where they are mostly in need.

Commenting on impact of future possible interest hikes in the United States, he said both China and other nations in Asia need to take into account of capital flows and trade data when making monetary policies, but there is no need to overreact to normalization of US economy.