China’s MSCI reality check is too big to ignore

In recent weeks, much of the debate on China has centered on the idea that it is “too big to be ignored,” meaning the rest of the world would inevitably need to own its equities and currency. But now it’s set for a reality check.

But last week’s decision by MSCI MSCI, -0.18%  tells us it’s too early to consider China a mainstream asset class. Despite much talk of reform, Beijing’s efforts to open its capital markets or make its financial system more transparent have been limited. Yuan USDCNY, +0.0242%  internationalization might be accelerating, but a capital-account opening still looks like a distant promise.

The decision against effectively forcing global fund managers to benchmark against an index they can still not freely buy and sell, in a currency that is not freely traded, is hard to take issue with.

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