UPDATE 1-China c.bank chief gets top post, way clear to stay on

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BEIJING, March 11 (Reuters) - China's central bank governor, Zhou Xiaochuan, was elected as a deputy chairman of parliament's top advisory body on Monday, the government said, clearing the way for him to stay on as head of the People's Bank of China for the time being.

Zhou's election to the Chinese People's Political Consultative Conference (CPPCC) gives him "national-level leader" rank that exempts him from compulsory retirement at 65 for officials in cabinet minister-ranked jobs.

Zhou reached that age in January. Reuters reported last month that Zhou was set to keep his central bank post, courtesy of his elevation to the CPPCC job.

The announcement comes amid China's annual session of parliament, the National People's Congress, which is scheduled to run from March 5 to 17.

Zhou's future has been in question since he was left out of the elite 205-member Central Committee of the Communist Party during a once-in-a-decade handover of power last November. Until now, membership has been a condition of holding a ministerial-level job such as the People's Bank of China governor.

But with the party's top leaders, Xi Jinping and Li Keqiang, apparently determined to deliver on promises to close a chasm between China's rich and poor, a way has been found to keep one of the driving forces behind a decade of financial reforms.

It is unclear how long Zhou would remain central bank chief, but a source with leadership ties told Reuters last month that he was needed to drive reforms to unshackle China's currency from capital account controls. Analysts believe the People's Bank of China (PBOC) aims to make the yuan basically convertible by 2015.

Zhou, who took control of the PBOC in 2002, is the architect of broad financial reforms that have spawned fledgling capital markets, liberalised some interest rates and broken the peg between the yuan and the U.S. dollar - a step along the path to turning it into a global currency on par with the greenback.

Reforms that further stimulate capital markets, improve returns to hundreds of millions of Chinese savers and boost investment options for the growing middle class are seen as vital to closing a wealth gap now at levels that a government index suggests requires urgent action.

Decades of economic reform have made some Chinese very rich and brought prosperity to an urban middle class. But many, particularly in the countryside, have been left behind, creating social tensions that worry the leadership. (Reporting by Ben Blanchard; editing by Jonathan Standing and Raju Gopalakrishnan)