So in early July last year when Baoneng, a privately run insurer little known at the time, revealed its shareholding in Vanke reached 5 per cent, Wang’s antenna was up but he failed to take any immediate action. Curiously, that appeared to remain the case even after Baoneng’s stake increased to more than 10 per cent late in the month, when Wang told Yao Zhenhua, the owner of Baoneng, his investment was not welcomed.

By mid-December when Vanke finally mounted a public defence and had its share trading suspended, Baoneng’s ownership had hit 24.26 per cent, making it the largest stakeholder. But even then, Wang did not line up a “white knight” to support him until March, when the Shenzhen Metro, backed by the municipal government, entered the fray.

Since the fight for control of Vanke’s boardroom went public, the flying accusations from both sides have become increasingly acrimonious and insulting. Wang reportedly denounced Baoneng as “barbarians”, alluding to the 1989 book Barbarians at the Gate that chronicled the battle for RJR Nabisco led by private-equity firm KKR. Wang later reportedly denied using the phrase.

The unprecedented battle for one of the country’s best known companies has captivated not only the business world but also ordinary mainlanders. Adding to the drama was Wang’s colourful personal life as he reportedly dated a minor actress 30 years his junior and pursued leisure adventures including climbing Mount Everest.

Under the intense spotlight of traditional and social media, the fight has become much bigger than a story about a simple hostile takeover. Many have seen the development as a landmark case of taking stock of the country’s overall corporate governance, maturity of the capital markets, and the adequate securities regulatory regime.

As the saga becomes the talk of the nation, it has also become a major social event and an increasingly political one with local authorities entering the fray. Based in Shenzhen, Vanke has secured strong support from local authorities, while Yao, who hails from the areas of Chaozhou and Shantou known for producing tough entrepreneurs, has reportedly lined up support from local officials and other business tycoons.

So far, both sides have dug in their heels, refusing to budge as their proxies release lurid details and inside information to discredit the other, including unfounded speculation about the business dealings of Wang’s girlfriend. This has given rise to concerns that the eventual outcome will be decided by the top leadership in Beijing as representatives from both sides feverishly work their connections to the corridors of the power.

Against such background, the role and the thinking of the regulators have become ever more important. Following Vanke’s allegations of irregularities about Baoneng’s fund-raising approach and its highly leveraged nature, at least four regulators including those in charge of banking, securities, and insurance, and government auditors spent three months investigating but found no major breach of existing regulations.

Little more than one week ago, both the securities and insurance regulators issued statements condemning Vanke’s management team and Baoneng, and urged them to resolve the disagreement.

Interestingly, the insurance regulator particularly cautioned insurance companies against becoming a financing platform like an “ATM” for major shareholders.

But in all, the fact that regulators blamed both sides equally only failed to clarify the messy situation. In particular, their statements failed to address widespread speculation over whether Baoneng had colluded with the second largest shareholder, the state-owned China Resources Group, in the epic battle.

Regulators are now under increasing pressure to take a deeper look at this issue. According to mainland media reports, ever since China Resources became Vanke’s largest shareholder with a little more than a 15 per cent stake in 2000, it had adopted a policy of not interfering with Vanke, until its current chairman Fu Yuning assumed the post in 2014.

Ostensibly, China Resources voted down Wang’s “white knight” offer, along with Baoneng, over fears its stake would be diluted. But there has been consistent speculation China Resources secretly intended to exert effective control of Vanke by trying to restructure its management team, hence its decision to keep out the “white knight”.

That implied both companies were working together to keep the hostile bid alive without publicly disclosing their intention, which breached regulations. Although both companies have repeatedly denied collusion, mainland media continued to publish reports about close financial transactions between the two companies and that Baoneng intended to nominate a China Resources executive to become the chairman of Vanke if it won the battle.

To clear persistent rumours of collusion, a deeper and thorough investigation by the regulators is clearly warranted.

Moreover, although regulators are keen to appear fair in their official stance, they should give priority weighting to protecting a successful and well-run company like Vanke and its well-admired management team and the long-term benefits of all shareholders, big or small. This has become an international norm when it comes to resolving the conflicts arising from hostile takeovers.

Public opinion now seems tilted towards nudging Vanke, Baoneng and China Resources to settle through a compromise, but the acrimonious battle probably means it is very difficult for the major players to reconcile with the current shareholding structure.

To save Vanke from disintegration, a better alternative is to encourage another white knight to enter the game to take over the stake from either Baoneng or China Resources. Wang’s previous rescue plan involving Shenzhen Metro swapping its land for a stake was convoluted, making it difficult to implement and bring tangible benefits to existing shareholders. But forming a new conglomerate comprised of reputable investors at home and abroad could be given a better reception if it raised enough cash to buy out Baoneng or China Resources.

Even more importantly, no matter how the battle ends, it highlights critical flaws in China’s fragmented regulatory regime, which has inadvertently aided the rise of shadow banking threatening the country’s entire financial system.

First of all, the latest saga shows that the rise of internet banking and wealth investment plans by insurance companies has rendered the existing regime based on industries increasingly wanting. As the regulators look after only their own turfs and effective intra-department communications is lacking, the three regulators in charge of banking, insurance, and securities launched their own investigations, and came to their own conclusions without enough cross-referencing.

There have been long-discussed plans to merge those regulators into a super-regulator to close loopholes but the leadership has been slow to make it happen due to opposition from vested interest groups.

A recent spate of collapses of online asset management and wealth management plans (known as AMPs and WMPs) should provide more impetus for decisive action. Baoneng reportedly used 26 billion yuan of such instruments to partly finance purchase of Vanke shares.

The mainland leadership has always played down the role of shadow banking, but the popular AMPs and WMPs are clearly state-sanctioned shadow banking techniques which pose significant risks for the entire banking system.

The fact that JPMorgan analysts estimated that AMP funds, which expose banks to fluctuations of the stock markets, stood at 32 trillion yuan at the end of March, flagged a clear red light for the authorities.