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

The People's Bank of China said Monday that lenders in offshore yuan-trading centers will now have to lock away a share of deposits in its accounts, ending the exemption for foreign institutions in a push to curb speculation against the currency. That followed large-scale intervention in Hong Kong last week that sent yuan borrowing rates in the city soaring to a record as liquidity was temporarily crunched.

China is caught in a dilemma as it pushes toward eventually letting market forces determine the yuan's value, but in the short term clings to old government controls to defend the currency and prevent a capital outflow that could harm stability and dent economic growth. What's not clear is how the heavy-handed state measures will go over in the 20-odd yuan trading hubs that now stretch from Singapore to London to Toronto.