Chinese stocks have been denied entry to international stock benchmarks by MSCI Inc. The move will come as a blow to investors looking to invest in the world's second-largest economy. MSCI cited concerns about access to Chinese markets as a reason for the non-inclusion. This is the third such decline by MSCI.

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The inclusion of Chinese stocks to the index would have led to billion of dollars worth of investment in China. The country is currently struggling to power through a sluggish growth pace. Earlier this year, MSCI laid out a road map for including Chinese stocks to the index, leading to speculations that they will be added soon. However, the index provider has announced that it is likely to wait and observe the situation.

Remy Briand, global head of research with MSCI, said, "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."

MSCI stated that it would continue to collaborate with Chinese authorities to study the impact of reforms in the market. The index provider said that China has undertaken important steps in this direction.

Chinese officials had justified the inclusion of Chinese stocks in the MSCI on account of the sheer size of the country's domestic share market. Qi Bin, director-general of international affairs for the China Securities Regulatory Commission, stated that "Theoretically if an international index is without this big market, it is incomplete."

Foreign investors can invest in Chinese companies through H-shares. These are the shares of the companies listed in Hong Kong. However, access to A-shares, which are the shares traded in Shanghai and Shenzhen, is restricted. Institutional investors can trade in the domestic stock market after receiving the required approval and license.

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