China is debating the establishment of a new "super regulator" for its finance and banking industries to improve co-ordination in a sector in which reform has been increasingly hamstrung by infighting and inertia.

The establishment of an institution is likely to be on the agenda of a closed-door meeting later this year of senior leaders and finance industry officials, according to government advisers and scholars.

Neither the date of the meeting nor its agenda had been settled but it was likely to be held in November, they said, and cover a range of issues.

The so-called Finance Work Committee meeting, to be chaired by Wen Jiabao, the prime minister, has only been held twice before and both times has been followed by major policy changes.

The last meeting in February 2002 laid the groundwork for a major reform of the large state banks, which involved the re-capitalisation of the three biggest institutions, followed by their listing overseas.

Topics under discussion ahead of the meeting include the introduction of a form of monetary or inflation targeting, instead of the present emphasis on tracking money supply as a benchmark for the macroeconomy.

Some officials are also pressing local governments to be allowed to issue municipal bonds to fund local services. This would wean them off over-reliance on revenues from land sales, often for dubious investment projects.

Local governments are forced to provide the bulk of services but do not have sufficient tax revenue to pay for them.

"We should raise money in a way that can be monitored by the public," said a prominent local economist consulted by the government.

The establishment of any over-reaching regulatory body could only proceed with a top-level consensus of the kind that could be worked out at such a meeting.

"We need some kind of structural co-ordinating body," said a government adviser. "But in China, institutions are very important because they involve senior people and their level in the bureaucracy, so it is a difficult decision.???

With the major decisions largely behind the government on the reform of the state banks, a key focus for reform remains the capital markets, where development has badly lagged growth in the real economy.

Elements of the capital markets and brokerages are governed by separate banking, insurance and securities regulators, as well the People's Bank of China, the central bank. Local governments also have significant shareholdings in brokerages, making them difficult to sell off.

The theme of the meeting dovetails with the agenda for faster domestic financial reform being pushed by Washington, alongside its demands for a strong Chinese currency. Hank Paulson, the US Treasury secretary, will visit China for the first time in his new job this month.

Editor: Yan