Tens of thousands of refugees from Myanmar have fled north across the Chinese border in recent weeks, driven by escalating fighting between Myanmar’s military and the Kachin Independence Army (KIA), according to aid workers in China’s Yunnan province.

The growing wave of refugees highlights a decades-old conflict between ethnic Kachin rebels and Myanmar’s army that diplomats see as a blight on efforts by president Thein Sein’s nominally civilian government to bring the country out of international isolation.

Both the US and European Union have set the resolution of conflict with ethnic militias as a key condition for lifting sanctions against Myanmar. For decades, the conflict has driven hundreds of thousands of villagers from their homes amid charges by human rights groups of military abuses including rape, forced labour and torture.

The government signed a landmark preliminary ceasefire agreement with ethnic Karen rebels in mid-January, and similar agreements have been reached with Shan, Chin and other ethnic rebel groups.

But repeated attempts at talks with the KIA have been derailed by persistent fighting, despite Mr Thein Sein’s order in early December to the army to cease hostilities. In earlier reports, military commanders claimed they were defending themselves against Kachin offensives, while Kachin representatives have claimed KIA bases and surrounding areas were attacked without provocation.

A Kachin representative who works with refugees on the Myanmar-China border on Tuesday said that fighting had ceased but neither side had pulled back their forces, which meant that “refugees cannot yet return”.

Chinese aid workers said the number of refugees had “greatly increased” in recent days. “Since January 1 2012, continued armed conflict in the Kachin area has led about 40,000 refugees to roam along the Chinese border, 25,000 have already crossed the border and are seeking shelter in Yunnan,” the Central Western Missionary Prayer Fellowship, an unofficial church in China that is providing relief services for refugees, said in a statement.

Tao Meisi, an aid worker in the Yingjiang county on the Myanmar border, said there were about 40,000 refugees in the area, including 20,000 people in Yingjiang alone. “Almost all are women, children and old people, and there are also pregnant and breast-feeding women among them,” Ms Tao said.

Many were in makeshift camps, others had found temporary shelter in schools and villages on both sides of the border, while thousands were roaming the woods, she said.

In contrast to previous bouts of fighting, the Chinese government appears to be trying to restrict the refugee flow into the country and has imposed a news blackout. Aid workers on the ground said Chinese authorities had tried to seal the border several times this month and the government, which issued an appeal to help refugees back in 2009, is not asking for humanitarian aid this time.

Asked for comment on reports that Myanmar troops had fired on a Chinese village sheltering refugees, the Chinese foreign ministry said it had not heard of the news.

The Kachin situation contrasts markedly with progress in peace talks with other ethnic rebel groups along Myanmar’s borders with Thailand and China. Diplomats say the Kachin conflict could be Mr Thein Sein’s single biggest challenge. Even the government’s chief negotiator, Aung Thaung, said last week that peace in Kachin state could take three years to achieve.

The KIA has emerged as “Myanmar’s most formidable insurgency”, according to the latest issue of Jane’s Terrorism and Security Monitor magazine. “Given its territorial positioning, military strength and political sophistication, the KIA has the potential to undermine the new government’s efforts and pose a significant threat, both militarily and economically,” it said.

Additional reporting by Chen Yuanni in Beijing