Amid all of the aggressive market reform that has taken place in China over the past 30 years, the country’s financial and capital markets are a glaring exception. Capital controls restrict flows of money in and out of the economy. The value of the currency, the yuan, is stage-managed by the state. The yuan isn’t fully convertible or allowed to trade freely outside the country, either. Foreign investors can buy stocks on local exchanges only on a very limited basis. Interest rates are controlled by the government as well. Foreign banks hold a measly 2% of the country’s banking assets.

For the good of China’s future economic development, this situation can’t persist.