Capital has to be held in Californian city (5)
I believe the answer is:
lhasa
'capital' is the definition.
(capital of Tibet)
'has to be held in californian city' is the wordplay.
'to be held in' means one lot of letters goes inside another.
'californian city' becomes 'la'.
'has' put into 'la' is 'LHASA'.
(Other definitions for lhasa that I've seen before include "Group; stripe" , "Tibet's "Forbidden City"" , "Tibetan capital" , "Sacred city" , "The Forbidden City in Tibet" .)