UPDATE 1-China says yuan convertibility in Qianhai to focus on certain areas

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HONG KONG, June 30 (Reuters) - A pilot scheme of yuan convertibility in China's new financial zone in the southern city of Shenzhen will be focused on certain capital-account deals that are still subject to tight controls, the country's central bank said on Saturday.

Under the requirement of 40 sub-items for full capital-account convertibility set by the International Monetary Fund, the yuan is fully convertible under five of them, basically convertible under 8 and partially convertible under 17.

"The convertibility level of about 75 percent of the capital-account categories is relatively high. The rest mainly covers debt and transactions related to financial derivatives," said Hu Xiaolian, vice governor of the People's Bank of China, without giving further details.

"The experiment of yuan convertibility under the capital account in Qianhai will mainly be focused on the areas where the convertibility level is low, for example lending," Hu said, referring to a district of Shenzhen.

China said on Friday it will experiment with service sector reforms in a new business zone offering freer currency movements and Hong Kong professional standards, building the sort of test bed that turned the country into a manufacturing powerhouse. [ID:ID:nL3E8HT3QQ]

While the currency is already convertible under China's current account, the broadest measure of trade in goods and services, the capital account, which covers portfolio investment and borrowing, is still closely managed by Beijing as it worries about abrupt capital flight and hot money inflows.

Chinese officials have not given a fixed timetable on a freely trade yuan, although the central bank has outlined the task of making the yuan "basically convertible" by 2015.

China may have to loosen its grip on the yuan to support its long-term ambition to increase the global clout of its currency to rival the U.S. dollar and euro, analysts say.

China has been promoting the international use of the yuan in trade to reduce the country's reliance on dollar financing. A thriving market in yuan-denominated bonds and deposits has sprung up in Hong Kong as a result.

Hu, speaking at a news conference in Hong Kong, also said the central bank has no immediate plans to lift a ceiling on the daily yuan purchases for Hong Kong residents, which is currently at 20,000 yuan ($3,100), but may consider relaxing the limit in the future as demand for yuan rises.

($1 = 6.3541 Chinese yuan) (Reporting By Kevin Yao; Editing by Anne Marie Roantree and Daniel Magnowski)