By Trevor Hunnicutt

HOLLYWOOD, Fla. (Reuters) - China's progress toward full inclusion of its stocks in global benchmarks could be halted if the world's second-largest economy cracks down further on people moving money out of the country, index provider MSCI Inc's top executive said on Monday.

In recent months China has been tightening its grip on individuals and businesses trying to move money out of the country in an effort to stabilize a faltering yuan, although it has sometimes denied the measures were an effort to impose new capital controls.

The yuan fell nearly 7 percent against the dollar last year, its biggest loss since 1994, under pressure from sluggish economic growth and a strong dollar.

A decision last June by New York-based MSCI to welcome the onshore Chinese stocks called "A shares" into its MSCI Emerging Markets Index could usher in hundreds of billion of dollars from asset managers, pension funds and insurers.

"If they reverse course and they restrict the 'out' door, then how can we?" MSCI Chairman and Chief Executive Henry Fernandez told Reuters. "It's going to be hard for the MSCI to put the A shares into the index because we will not be doing a good service to our clients."

Fernandez said capital controls have not yet affected international investors but nonetheless are the biggest potential issue MSCI is monitoring in China. He spoke to Reuters on the sidelines of Inside ETFs, an industry conference in Florida.

Last June, MSCI declined to add the A shares to its global emerging markets benchmark index for the third year running, saying China had more to do to open up its market.

"China has made a lot of progress," Fernandez said, citing the extension of a link between Shanghai and Hong Kong's international market to a $3 trillion market in Shenzhen. That makes it easier for international investors to access the Chinese stocks.

Consultations on the China A Shares inclusion likely will start gearing up after China celebrates its New Year later in January, and some investors said they were optimistic.

"They want money coming in and they're not going to do anything to keep people from coming in," said Brendan Ahern, chief investment officer at Krane Funds Advisors LLC in New York.

China Securities Regulatory Commission, the country's markets regulator, and the State Administration of Foreign Exchange, which controls China's capital account, could not be reached for comment.

(Reporting by Trevor Hunnicutt; Additional reporting by Michelle Price in Hong Kong; Editing by Leslie Adler and Bill Trott)