Making the MSCI cut does mark a very important step in China's aim to be a major player in global markets but some still question the control it also wants to exert over its own financial market. It also advances President Xi Jinping's ambitions to make the yuan a global currency.

MSCI said Wednesday it will include 222 A-share stocks, which only accounts for 0.73 per cent of the weighting of the EM Index.

"Potential inclusion in MSCI's Emerging Market Index signals to worldwide investors that the country's capital market has attained greater maturity in terms of efficiency, governance and regulatory framework".

Why MSCI inclusion matters to China?

China's inclusion had been rejected for the past three years, amid worries about regulation and accessibility for global investors.

China's inclusion would help around $8 billion flow into its stock markets, Capital Economics said, describing it as "a token inclusion" given that the weighting would be the equivalent of 0.1 percent of the domestic market's capitalization.

"We expect the central bank to really remain on the dovish side", added Crédit Agricole's Tresca.

Lieblich said on the press call that the oil producing nation's highly anticipated Saudi Aramco initial public offering "will have absolutely no bearing on our decision to include the Saudi Arabia index into the EM index".

Shenzhen-listed Chinese home appliance maker Midea Group Co 000333.SZ - potentially a heavyweight in the EMI - has witnessed a surge in foreign interest since MSCI in March unveiled its new methodology for China inclusion.

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China's A-share stocks refer to Renminbi denominated stocks traded at Shanghai and Shenzhen stock exchanges.

MSCI's bellwether emerging-market index has offered exposure only to Chinese shares traded in Hong Kong and the USA, such as Alibaba (BABA), Baidu (BIDU) and Tencent Holdings (TCEHY). In 2016 it reduced the number of shares under consideration from 448.

While mainland equities have been losing value, the nation's stocks traded offshore have surged toward two-year highs, led by technology firms. And, while the markets wait for this week's decision from the MSCI, it's worth reminding ourselves what this means for pension funds and other institutional investors.

Oil prices returned to bear-market territory overnight and the USA benchmark has fallen 20% from its last high point, with cuts by the Organization of the Petroleum Exporting Countries offset by increasing production elsewhere. In defiance of Moody's surprise move, Chinese stocks even closed higher and shrugged off the fresh credit concerns.

The Shanghai Composite Index gained 0.68 percent to 3,144.37 points.

China's offshore yuan was little changed at 6.8237 per dollar on Tuesday.

David Semple, portfolio manager for the VanEck Emerging Markets Equity strategy, said that "in our view, the exclusion of China A shares in prior years was simply postponing the inevitable".

The MSCI decision was overshadowed by the fall in oil prices to seven-month lows following news of an increase in production from Libya and Nigeria.

In particular, MSCI will launch the MSCI China A International Large Cap Provisional Index on June 21, 2017, followed by additional global and regional provisional indexes, including the MSCI China and MSCI Emerging Markets Provisional Indexes, in August 2017.