By Philippe Naughton

SYDNEY, Sept 26 (Reuter) - Australian Prime Minister John Howard received Tibet's exiled spiritual leader, the Dalai Lama, on Thursday for a meeting that had drawn threats of trade retaliation from China.

The Tibetan Buddhist god-king said before the 35-minute meeting that he would argue for "meaningful negotiations" with Beijing on the future of his Himalayan homeland.

He said later the talks had been "very positive."

A statement from Howard's office made no mention of politics. The meeting, it said, had focused on religion, education and Australia's football "grand finals" this weekend.

"The two men had a relaxed discussion, largely about values and attitudes and the importance of study and learning," Howard's office said.

"The two men spoke of the importance of religious tolerance and of the Tibetan and Buddhist communities in Australia.

"The Dalai Lama said he had observed such religious tolerance here... (He) said he had enjoyed the prime minister's remark that he would have observed a good deal of religious fervour surrounding the grand finals," the spokesman said.

China on Tuesday threatened vague trade retaliation after Howard confirmed he would meet the Dalai Lama, who fled Tibet in 1959 after an abortive uprising against Beijing's rule.

About 50 pro-Tibet activists were waiting at Howard's Sydney office to greet the Nobel Peace Prize winner, who is dismissed by China as a separatist troublemaker.

As the meeting began, China's Foreign Ministry spokesman Shen Guofang said in Beijing: "We hope the Australian government can rectify its mistakes concerning this problem."

George Farley, who organised the Dalai Lama's third visit to Australia, said the two men exchanged a "good Australian handshake" after the meeting.

"In one word, what he's asking for is dialogue, not confrontation, and certainly not to embarrass the Chinese in any way at all," said Farley, who was not in the meeting.

"He would have appealed to John Howard to help him in any way he could," Farley added.

The Dalai Lama himself told reporters the meeting was "very positive." Asked if it would help the Tibetan cause, he replied: "I don't know. The Tibet issue is not easy."

Australian government leaders appeared to have no real idea how seriously to take the Chinese trade threat.

Analysts said the first victims of any retaliation could be Australian banks trying to expand their links with China.

The activists outside Howard's office praised him for meeting the Dalai Lama. Some suggested that Australia fresh from its diplomatic success in reviving the nuclear test ban treaty at the United Nations could play the role of broker between China and the people of Tibet.

"We were the first to begin opening the doors to China. We have the imagination. It would bring us such respect," said Melbourne campaigner Irina Surjenko.