By Jane Macartney

BEIJING, Sept 18 (Reuter) - A foreign leader shakes hands with a smiling, bespectacled Tibetan god-king swathed in crimson monastic robes and China's communist leaders see red.

The smiling monk is Tibet's exiled spiritual leader, the Dalai Lama. The latest foreign leader to attract China's ire is Australian Prime Minister John Howard who insisted on Wednesday he has every intention of meeting the visiting Tibetan monk.

Beijing's angry response to such meetings between the spiritual leader it regards as a dangerous political subversive and foreign heads of government has become almost a matter of form, diplomats said.

"Beijing sees this type of meeting (with the Dalai Lama) as an infringement of its sovereignty," said one diplomat. "It can't be seen to let these incidents pass unnoticed."

China's Foreign Ministry warned this week that foreign heads of government who accorded the Dalai Lama the honour of a meeting were placing lucrative trade and business ties with Beijing in jeopardy.

It is a threat that Beijing rolls out regularly to those leaders who meet the Dalai Lama or authorities of Taiwan, which China regards as a rebel province.

Diplomats say Beijing knows it can ill afford to impose major economic retribution on its many trading partners and investor nations who have allowed visits by the Dalai Lama.

But few heads of government have recently taken the step of meeting him. On a recent visit to Britain, the Dalai Lama met the Queen Mother instead of Prime Minister John Major.

"But I think they're going to have to do something," said one Western diplomat. "They have said it would have an adverse impact and now they have to demonstrate it."

Australia, for example, is China's main source of foreign wool to feed its textile industry. The sales account for about 22 percent of Australia's total wool exports and diplomats said they did not expect any Chinese retaliation to touch commodities trade.

China's fiercest response to the Dalai Lama's globe-trotting campaign for support for his campaign for real autonomy for his Himalayan homeland was directed against Germany this year when the Bonn parliament adopted a resolution condemning Chinese policies in Tibet.

Enraged at the government-backed resolution accusing China of trying to eradicate Tibet's cultural identity, Beijing withdrew an invitation to Foreign Minister Klaus Kinkel to visit last July. Bonn responded by freezing high-level contacts.

The ferocity of China's response stemmed from the rare nature of the resolution, which while not questioning Tibet's status as part of China, called on Beijing to give Tibetans more rights.

The status of Tibet, and the international campaign by its champion and exiled god-king the Dalai Lama for more autonomy, evokes a visceral response from Beijing, which is deeply protective of its unity and sovereignty, diplomats say.

Rarely has a country's parliament, with government support, adopted a resolution aimed so directly at Chinese policy.

China's response may have hurt Beijing as much as Bonn.

"I think after the German experience they may be fairly careful with Australia and New Zealand," the diplomat said.

The Dalai Lama arrived this week in Australia after a trip to New Zealand, where he met Prime Minister Jim Bolger.

"Countries, including Australia and New Zealand, should be clear-minded about the Dalai Lama who deceives international opinion and the leaders of some countries," China's Foreign Ministry spokesman said this week.

The Dalai Lama has been in exile since an abortive uprising against Chinese rule in Tibet in 1959. He won the 1989 Nobel Peace prize for his peaceful campaign for Tibetan autonomy.