OREANDA-NEWS. As Chinese leaders indicate that they remain committed to market reforms, adding China A-shares and international small-capitalization stocks to Vanguard investment portfolios will more accurately reflect the international markets, a Vanguard equity indexing leader said.

Even if they stumble on occasion, Chinese authorities continue to dismantle a Great Wall of regulation and are making the country's stock exchanges and economy more open to market forces. That long-term trend toward a market-based economy has presented an opportunity for China's mainland A-shares to be incorporated in Vanguard Emerging Markets Stock Index Fund, which means the fund will more accurately reflect emerging markets worldwide, said Joe Brennan, head of Vanguard Equity Index Group.

"The Chinese markets are opening up faster than we and the market would have thought possible a couple of years ago, and we don't see that stopping," Mr. Brennan said. "Our interactions with the Chinese officials have been fantastic, and they clearly do know what they're doing. They're trying to be thoughtful about their markets' evolution. That's smart given the country's size."

China was the top financial news story this past summer, as Chinese authorities attempted to stanch a stock market crash and surprised the markets by allowing their currency to fall. Various commentators have warned about the country's burgeoning debt and reliance on state control.

Nonetheless, the die has been cast, and China remains committed to transitioning from its state-based economic system, Mr. Brennan said. "I think the Chinese understand that once you go down this path, going back isn't really an option."

The inclusion of China A-shares, which will take place over the next year, is part of an effort to broaden diversification in four Vanguard international equity index funds.

Mr. Brennan said market valuations are never a factor when a country, a sector, or an individual company is added to or taken out of an index. Nonetheless, it's not necessarily bad for investors that China's markets fell shortly after Vanguard announced that it would begin incorporating A-shares.

"That all happened after our plans evolved," he said. "If that's going to happen, you'd rather it happen before we start adding A-shares. We're going to be adding them over the course of a year, and investors will average into the additional China exposure."