The move would send a surge of passive cash into Chinese stocks, something that has until now been delayed as MSCI ruled against their inclusion in June 2015. The index provider said at the time China needed to make its market more accessible, but this hurdle seems to have been cleared thanks to liberalisation of the Qualified Foreign Institutional Investor programme, which is used by foreign investors to access the market.
This means A shares could be added as early as May 2017 if MSCI says yes next month. At full inclusion, China would account for 43.6 per cent of the MSCI Emerging Markets index, based on MSCI's original 2014 estimate. The index provider has said the process will take place gradually - starting with just 5 per cent of China A shares. Offshore Chinese shares are already included.
The decision comes at a controversial time. China is experiencing a slowdown in growth and triggered a global stock market rout in August last year, which saw A shares plunge in value.
A wide range of passive funds tracking MSCI's Emerging Markets index would be obliged to wade into the A share market in a big way if the decision went ahead, and commentators have mixed views on the risks of adding the previously volatile shares to the popular index.
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We take an in-depth look at this issue in our Big Theme: More China with your emerging markets?
