To fulfil its ambition of becoming an offshore yuan trading centre, London would need to wait for the Bank of England to relax the rules for allowing more mainland banks to set up branches, said mainland bankers.
Apart from Bank of China, which has had a branch in London since 1929 for historical reasons, other mainland lenders operating in Britain are only allowed to set up subsidiary operations.
Their business volume is restricted as a subsidiary is not allowed to lend beyond its capital, which is capped.
A mainland banker who did not want to be identified, said if his bank could set up a branch in London, it could do business on a much bigger scale.
"Many mainland banks are allowed to set up branches in Brussels and other places in Europe or other international financial centres but not in London.
"This restricts the growth of Chinese banks in London," the banker said.
"This will also affect London's plan to become an international yuan trading centre."
Mark Boleat of the City of London, said this is a big policy issue.
All non-European banks are required to set up subsidiaries instead of branches, Boleat said.
"This is not to target Chinese banks as all other foreign banks - from Indonesia or Brazil or anywhere else - face the same restrictions," he said.
Boleat said Chinese lenders could still do yuan business in London but admitted they face restrictions.
"It's not good for London if it is to compete for businesses related to offshore RMB," he said.
"Their voice has been heard and the Bank of England and the Financial Services Authority are looking into this issue.
"We are working to see if there is a solution," Boleat said.