China's latest measures to shore up its currency and plug anoutflow of capital risk setting back the long-held goal for aninternationalized yuan.

The People's Bank of China said Monday that lenders in offshoreyuan-trading centers will now have to lock away a share of depositsin its accounts, ending the exemption for foreign institutions in apush to curb speculation against the currency. That followedlarge-scale intervention in Hong Kong last week that sent yuanborrowing rates in the city soaring to a record as liquidity wastemporarily crunched.

China is caught in a dilemma as it pushes toward eventuallyletting market forces determine the yuan's value, but in the shortterm clings to old government controls to defend the currency andprevent a capital outflow that could harm stability and denteconomic growth. What's not clear is how the heavy-handed statemeasures will go over in the 20-odd yuan trading hubs that nowstretch from Singapore to London to Toronto.