Chinese shares in MSCI: What’s the big deal?
If Beijing wants to be seen as a new global leader on free trade, it should start by meeting well-established international market standards
After much ado, this year could well see Chinese domestic A shares included in the broadly followed MSCI Emerging Market Index – but don’t expect the financial equivalent of a victory parade.
Instead, after a formal announcement expected in June, both Chinese authorities and the MSCI will likely want to move on quickly from the saga – once marketed as a sign of China’s economic rise and now widely thought to be a lesson in the very real limitations of financial reforms in China.
MSCI, which is used by 97 out of 100 of the world’s largest money managers, has worked with authorities for years to include Chinese A shares. What concerns MSCI about Beijing is its true commitment to free trade, how easily it allows money to move in and out of the country, and the veto it has over any product using A shares as a reference price – an effort to control how much offshore products can affect its domestic market.
