MSCI Inc., a widely-followed global index provider, said on Tuesday it wasn't adding China’s local-currency shares to its benchmark emerging markets index, a fresh setback for China’s efforts to join international markets.

The inclusion of China’s local-currency shares, known as A shares, had been widely anticipated by global investors and Wall Street. It was expected to bring tens of billions of dollars into China’s stock market at a time when its economy is cooling and capital is fleeing. The MSCI Emerging Markets Index is tracked by money managers with some $1.5 trillion of assets.

But MSCI said investor concern over the openness and transparency of Chinese markets, despite years of reform, convinced the index provider that China’s A shares weren't ready for the index.

“International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index,” said Remy Briand, global head of research at MSCI.

MSCI’s decision is a blow to Chinese authorities who have been eager to attract more foreign capital to their stock market. To win over MSCI, Chinese regulators recently stepped up their reform efforts, such as creating new rules that limit how long companies could suspend trading in their shares, and allowing foreign money management funds to take bigger stakes in the market.