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China’s Unreadiness for Global Funds Shown by MSCI Ruling

MSCI Inc.’s decision to exclude China’s local shares from its global indexes shows the nation must reduce trading restrictions to lure international investors to the biggest emerging economy.

China’s quota system for overseas money managers, which limits holdings to less than 3 percent of the country’s $3.3 trillion market capitalization, is the biggest hurdle for including mainland shares in global funds, MSCI said yesterday after a yearlong consultation with investors. The nation’s rules against same-day trading, controls on using multiple brokers and uncertain tax laws also deter investors, MSCI said.