The FT reports that a bitter turf war between China’s two most important financial regulators is hampering policy co-ordination just as the country’s debt-laden financial system is starting to show signs of real strain.

The China Banking Regulatory Commission and the People’s Bank of China, the central bank, have always been rivals, but now rising tensions are obstructing reforms and efforts to tackle risks in the financial sector, according to officials from both agencies.

The row comes after several high-profile defaults in recent weeks including the first ever public domestic bond default in modern history and a small bank run in eastern China.

The council has not been able to meet because of opposition from the CBRC, which has vehemently objected to what it sees as a power grab by the PBoC.  In recent weeks the central bank, which has responsibility for overall financial stability in China, has expressed frustration at the CBRC’s unwillingness or inability to rein in the off-balance sheet activity of the state-controlled banking system, which has ballooned in recent years.

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