By Catherine Bremer

PARIS (Reuters) - Efforts to coax China into throwing the euro zone a lifeline will dominate this week's G20 Summit and leave Beijing holding the cards as world leaders try to restore market confidence with pledges to reduce economic imbalances.

Heads of state and finance chiefs from the 20 leading economies want to use the November 3-4 meeting in Cannes, France, to send a message that Europe has its debt crisis under control and any risks to the world economy are being taken care of.

Yet simmering tensions, which flared up at recent talks in Brussels and Paris, and bleak economic prospects may make it harder to stage a convincing show of unity than in 2008, when the G20 pulled together to fix the financial crisis.

As well as frustration at European dithering over its debt crisis, France and Germany have clashed over who should shoulder the bloc's losses and Washington disagrees with emerging powers over how to bolster the International Monetary Fund.

Now, Europe's need of China's surplus underlines how stagnant growth and huge debts have left the rich world economically dependent on emerging nations and with even less leverage than before to pressure Beijing over its yuan policy.

The officials will gather on the French Riviera coast against a backdrop of public anger over economic gloom and a perception that taxpayers are paying for the sins of reckless banks. Authorities are expecting hundreds of protesters.

The OECD slashed its 2012 growth outlook for the euro zone and United States Monday and said bold G20 action was needed to restore confidence and avert a slowdown.

Despite denials from European officials that they have lost their negotiating position and promises that China would not be offered concessions, Europe's bid to have Beijing contribute to a special purpose investment vehicle (SPIV) to leverage its EFSF bailout fund has put the ball in China's court for France's final G20 gathering.

"There's no reason now why China should budge on anything," an official involved in G20 summit preparations told Reuters.

Japan also set the stage for some tetchy discussions on capital flows after it intervened Monday to weaken the yen.

Tokyo wants G20 sympathy for having to deal with a strong currency on top of ballooning debt and a $250 billion rebuilding bill from a March earthquake and tsunami.

SHORT-TERM FOCUS

Hoping to use his G20 stewardship as a springboard for a 2012 reelection bid, French President Nicolas Sarkozy set ambitious goals including a fundamental rethink of the global monetary system and measures to fight commodity price volatility and rein in speculative capital flows.

He was forced to scale back his expectations early on, as Europe's debt crisis gathered pace. The market turmoil of recent weeks, as markets lost confidence in the euro zone, has made crisis firefighting the priority over long-term reforms.

"Clearly things have changed, especially since August. The challenge for Cannes is to find a coordinated response to this situation. Confidence will only return if we can convince markets we have a long-term vision that is flexible enough to ward off another crisis," said a French government source.

The G20's closing communique will give a vote of confidence to the crisis package agreed by euro zone leaders in Brussels last week, while noting that work still needs to be done on the specifics of strengthening the EFSF bailout fund and on fortifying member states' public finances.

With many details still up in the air, the package will be discussed in depth in Cannes, but G20 sources seemed not to be expecting commitments from China, India, Russia or the IMF, given questions about the safety of a future SPIV.

"At this moment we are not considering it because we don't have enough information," a Brazilian government source said. "If the SPIV sells paper with a triple-A rating and guarantees, then the central bank will analyze if it's worth it."

EFSF head Klaus Regling has flown to Asia to court China and Japan. China has declined to commit to anything and Japan said only that it will keep buying EFSF bonds.

"We believe the G20 summit can send a signal in terms of what is said and what is done that builds momentum on what was agreed at the summit in Brussels," said one euro zone source.

PLEDGES ON IMBALANCES

Concretely, G20 leaders in Cannes will set out a list of economic pledges, with dates, aimed at tackling the imbalances that set the stage for the 2007-09 crisis, such as the gaping U.S. trade gap and the corresponding surplus in China.

The G20 had named seven countries that should take action: the United States, China, Japan, Germany, France, Britain and India, but all 20 are now expected to promise fiscal consolidation in high-deficit economies and stimulus measures in those with surpluses.

"Each nation must do its part to ensure that global growth is balanced and sustainable," U.S. President Barack Obama wrote in a Financial Times Op-Ed ahead of the Cannes meeting.

Washington wants countries in good health to soft-pedal on austerity measures or even inject fresh stimulus, but Germany for one is not enthusiastic, and Obama's struggle to pass a jobs stimulus bill leaves him ill-placed to prod others.

As for the rest of Europe, Italy is already straining to deliver on promised reforms and France is having to hunt for new areas to cut spending so it can reach its deficit targets.

U.S. economist Nouriel Roubini told reporters in Paris last week that the issue was no longer whether there would be another recession in the euro zone, but how severe it would be.

Given their surpluses, emerging market exporters are being asked to tweak their economic models to lift internal demand, with China set to promise a 5-year plan to boost consumption.

Developing countries in the G20 are expected to show willing, but only in exchange for reassurances from Europe, whose debt crisis has already dampened their outlooks.

Less likely is any progress on the West's push to get China to increase the value of the yuan, to reduce trade imbalances.

Even before Europe's EFSF pitch, the chances of China giving up ground were dealt a blow by a U.S. bill that could slap tariffs on products from countries with weak currencies.

"It's not just about the EFSF," a European G20 source said. "The U.S. vote may make the Chinese more reticent. I don't see the environment as extraordinarily favorable."

France has dangled the idea of bringing the yuan into the basket of currencies making up the IMF's Special Drawing Right, to divert the debate onto entry criteria like free "usability."

German Deputy Finance Minister Joerg Asmussen told Reuters the entry criteria would not be watered down and it could take "some years" for the SDR basket to be expanded.

(Additional reporting by Brian Love and; Emmanuel Jarry in Paris; Claire Watson in Nice; Noah Barkin in Berlin, Louise Egan in Ottawa and Isabel Versiani in Brazilia; editing by Anna Willard)