About half the foreign banks on the mainland said the global financial crisis had affected their business models in the country, PricewaterhouseCoopers finds in a survey of 41 overseas lenders. Only a few banks believed their market share, now at less than 3 per cent, will increase as they have slowed expansion plans, according to PwC's annual survey conducted in April and May. 'The reasons behind this include strong and effective competition from the large domestic banks, economic factors, an uneven playing field and a decline in global trade,' said Mervyn Jacob, PwC's financial services leader for China and Hong Kong. If Shanghai could turn into an international financial centre, foreign banks expected their market share could expand greatly, Mr Jacob said. Based on interviews with chief executives, senior executives and branch managers at foreign banks, the survey found that competition from domestic banks is considered the second most challenging area after the regulatory environment. The respondents said quotas on yuan-denominated loans had been removed but the limit on US dollar loans remained in place. 'The liquidity crisis magnified as domestic banks stopped lending to foreign banks,' Mr Jacob said. Foreign banks aimed to incorporate locally, which will enable them to offer more products, but those that had not done so found it difficult to meet the evolving and stringent entry requirements, the survey said. Many locally incorporated lenders said they were constrained by the regulatory environment and the extensive reporting requirements, said Mr Jacob. At present, 26 foreign banks have incorporated locally since the mainland opened up the sector in 2006. The survey found the figure would rise to 30 to 40 by 2012.