* Shenzhen move would be big step to opening capital account
* No details on convertibility plan, news conference Friday
* Shenzhen economic zone project due for completion in 2020 (Adds details, background)
By Rachel Lee
HONG KONG, June 28 (Reuters) - Beijing will allow yuan convertibility in a proposed new financial services zone in the southern city of Shenzhen, a Chinese official said on Thursday, in what will be a major new step towards opening up the country's capital account.
The Chinese official travelling in Hong Kong told reporters that the initiative would be launched in the Qianhai Bay Economic Zone, a district in Shenzhen near the border with Hong Kong.
The announcement on the economic zone, envisaged as a $45 billion 'mini-Hong Kong' due for completion in 2020 on what is now a barren stretch of land in western Shenzhen, comes on the eve of a visit by China's President Hu Jintao to Hong Kong.
Details of the extent of planned yuan convertibility were not immediately clear.
China has been steadily expanding the role played by Hong Kong in internationalising the yuan, which it hopes will one day become a global currency like the dollar, and in building up the country's financial markets.
The official was speaking at the launch of China's 23 billion yuan ($3.62 billion) sovereign bond in Hong Kong, the country's fourth such offering and largest to date. The bond includes a 2 billion yuan central bank tranche, the first direct tender to official investors in the offshore yuan bond market, a key step in allowing central banks to diversify reserves into China's currency.
Speaking at a media briefing following the launch at the Bank of China tower in Hong Kong, the official repeated statements issued a day earlier through the Xinhua news agency that China would promote the further development of the offshore yuan market in Hong Kong as part of a new package of policies for the territory ahead the 15th anniversary of its return to China.
The statements also said China would promote the mutual listings of exchange-traded funds (ETFs) on Hong Kong and mainland stock exchanges and allow Hong Kong-based financial firms to set up consumer financing companies in Guangdong.
The Hong Kong government issued a press release saying that, on Friday, high level officials from China's National Development and Reform Commission, the state planning agency, and from the Shenzhen government will introduce policies concerning the development and opening of the Qianhai Shenzhen zone. The release offered no other details. ($1 = 6.3554 Chinese yuan) (Additional reporting by Tian Chen, Kayla Zhang, James Pomfret and Michael Flaherty; Editing by Edmund Klamann)
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