CHINA'S total social financing this year may top 18 trillion yuan (US$2.8 trillion), a rise of 3.5 trillion yuan from the official target due to inflow of non-banking liquidity, Fitch Ratings said yesterday.

Banks' letters of credit, trust product credit, credit from other non-banking financial institutions and loans from Hong Kong banks make up the 3.5 trillion yuan increase, said Charlene Chu, Fitch's head of China Financial Institutions, in Shanghai yesterday.

Social financing, including loans, bank acceptance bills, entrusted loans, corporate bonds and equity financing, hit 7.76 trillion yuan by the end of June, a fall of 384.7 billion yuan from a year ago, the People's Bank of China said in June.

The PBOC began to disclose social financing data on a quarterly basis this year as loans alone don't show the full picture of monetary conditions in the country with a growing number of financing sources. Total social financing includes all funds raised by entities in the real economy.

Banks have a tendency not to put certain types of credit on their balance sheet in a bid to circumvent credit control measures, analysts have said. But the rising off-balance-sheet exposure could mask a real banking exposure.

For instance, Guangdong Development Bank's credit grew 49.8 percent in 2010. However, including undisclosed acceptances, the bank's financing actually grew by 91.5 percent.

"Off-balance-sheet activity has grown, adding fire to the credit boom and providing banks with new channels to window dress financials," Chu said.

China faces a "better than even chance" of another downgrade to its local currency debt rating on rising defaults and high inflation after a credit binge, Fitch has said.