A senior U.S. Treasury Department official said on Tuesday the G20 expects to make progress on guidelines for identifying economic imbalances this week and soon will be able to list countries with problems.

I do expect a short list of countries to emerge from this process and those countries will be the focus of a second stage of analysis, U.S. Treasury officials told reporters at a briefing ahead of a meeting of the Group of Twenty rich and emerging-market nations Thursday evening and Friday.

The G20 is aiming to develop indicative guidelines for use in detecting imbalances such as excessive deficits or surpluses and then move on to develop policy recommendations for correcting them.

I think that there will pretty shortly emerge a pretty clear list of countries that will be the ones that we'll want to take a look at, the official said while emphasizing the G20 was just at the first stage of developing guidelines.

The G20, which includes both rich and developing market nations such as China, India and Brazil, is meeting on the sidelines of semi-annual meetings of the International Monetary Fund and World Bank.

The Group of Seven club of developed countries also meets separately on Thursday night, and the U.S. official said they were likely to hold to their long-standing position that excessive volatility in currency exchange markets was unacceptable.

The G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan -- conducted a rare coordinated intervention in currency markets last month after Japan's yen accelerated sharply in value following the earthquake that struck Japan.

The G20's aim is to push forward a complex plan for better balancing the global economy by finding means for altering policies when some countries develop over-sized trade surpluses or other imbalances.

China is the country most regularly associated with such surpluses and is regularly pushed to take measures to boost domestic demand and rely less on exports.

The U.S. official cited a heightened awareness among Chinese officials about the need to rebalance its growth to stress domestic consumption, as reflected in Beijing's own latest five-year economic plan.

The official said China has made progress on foreign exchange flexibility, with a 4.3 percent nominal increase in the yuan versus the dollar since last June. The official reiterated the Treasury's view that this is a 10 percent increase in the real bilateral exchange rate when China's higher inflation rate is factored in.

We're seeing some movement there and we expect to see continued movement on that front, the official said of the yuan/dollar exchange rate. One of the key challenges the G20 faces is to ensure that member countries permit exchange rates to respond more fully to market forces, the official added.

China is now the world's No. 2 economy, behind the United States, and many economists say its yuan currency would likely rise 25 percent or more in value if it was not so tightly controlled by the Chinese government. That would make Chinese imports more expensive for American consumers and presumably help shrink the U.S. trade deficit with China.

(CORRECTS currency to yuan in 11th paragraph)

(Reporting by Glenn Somerville and David Lawder, editing by Dan Grebler)

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