Chinese Financial Reform, Moving at Beijing's Pace

For three years, China and global stock benchmark provider MSCI have been working together to resolve concerns over China's domestic stock markets. Resolution would clear the way for MSCI to add China's domestically listed, yuan-denominated stocks known as A-shares to its emerging markets index. For two years, the firm had deemed Chinese progress on market reforms insufficient. Citing concerns over repatriation limits, untested trading suspension policies and the preapproval requirements by local exchanges (Shenzhen and Shanghai) for launching new financial products, such as exchange-traded funds (ETFs), MSCI opted on June 14 again not to include China's A-shares in the index.

China will continue to work with the group in hopes of being included when MSCI does its next annual review in June 2017. The stock index firm even said it could include China's A-shares sooner should sufficient liberalization occur and the outstanding concerns be resolved before then. But, as the process has made clear, Beijing will liberalize its financial system at its own pace, and it will not risk upsetting its delicate socio-economic system.