FTSE launched two new emerging markets indices, which include a limited allocation to China A Shares, Mark Makepeace, the index provider's chief executive announced on Tuesday in Hong Kong.

"The inclusion of China A Shares is the most significant challenge today facing global benchmark providers," he said. "Our customers have been telling us that they want greater access, but they lacked an appropriate benchmark," he said. "The transition is now beginning."

The transitional indices are intended to pave the way for the shares' full inclusion when they meet the index provider's eligibility criteria. This is likely to happen in two to three years, according to Makepeace.

The initial allocation is determined by the size of the China A share market available to foreign investors via QFII and RQFII schemes. The allocation will be updated quarterly, to reflect new QFII and RQFII quota awarded to investors.

Currently, China's weight in FTSE Emerging Index is 26.15%, reflecting B Shares, H Shares, Red chips and P chips, available to foreign investors today. Together with A Shares, the weight will be 29.72%

By comparison, if A Shares were included at their market value, their weight would be 40.01%, and China's total weight 56.42%, reflecting the country's growing dominance of the emerging markets economy.

FTSE will also provide customised solutions including China A Shares in the absence of quota restrictions, for asset managers who aren't subject to them.

The creation of the new indices gives asset managers the flexibility to proceed with inclusion of A shares at their own pace. FTSE's existing emerging market indices are not being changed at this point.

China A Shares market meets seven out of nine criteria for inclusion into FTSE's global indices today. Considering the current pace of change, Makepeace expects the outstanding issues around capital mobility and clearing & settlement to be resolved in the next three years.