China’s broad credit picked up in the third quarter and will exceed 17 trillion yuan ($2.7 trillion) in 2012, but the quick expansion has limits, Fitch Ratings said in a report published on Thursday.

Faster growth of broad credit in the third quarter was one of the factors behind the recent improvement in Chinese economic data, the agency said.

Fitch's measure of broad credit includes shadow and offshore sources omitted from the central bank's official total societal financing metric.

“This marks the fourth year in a row that net new credit will exceed one-third of GDP," said Charlene Chu, head of Chinese banks' ratings at Fitch.

At current growth rates, by 2013 China's banking sector assets will have expanded by nearly $14 trillion since 2008, the agency said. This is equivalent to replicating the entire United States commercial banking sector in just five years.

But such massive balance sheet expansion has limits, according to the agency.

"Rising leverage either will swamp borrowers' ability to repay, or banks' funding and capital needs will fall short of existing resources," Chu said.

The agency expects capital constraints to become more binding in 2013, particularly for mid-tier and city commercial banks.