KATHMANDU, Dec 2 (Reuter) - China and Nepal were expected to sign an agreement to boost economic cooperation during the first visit by a Chinese president to the Himalayan kingdom in 12 years, officials said on Monday.

Jiang Zemin was scheduled to arrive in Nepal's capital of Kathmandu from Pakistan on Wednesday as the guest of King Birendra, the world's only Hindu monarch. King Birendra visited China in August.

Jiang, who was set to meet Prime Minister Sher Bahadur Deuba and the leader of the communist United Marxist-Leninist (UML) party, Man Mohan Adhikary, was expected to sign an accord to strengthen bilateral economic ties, officials said.

Nepal's trade defict with China widened to $52.9 million in the 1994/95 financial year, which ended in mid-July 1995, up from $43.8 million the previous year. Many Nepali businessmen eye neighbouring Tibet as a promising market.

"Nepal can be an ideal place to supply many, many products required in Tibet for its development construction," said Padma Jyoti, president of the Federation of the Nepalese Chambers of Commerce and Industry.

Nepal, which liberalised its economy in 1992, has invited Chinese investment in water resources and tourism.

A Chinese business delegation in October discussed possible joint ventures in hydropower, pharmaceuticals, cement, poultry farming, garments and sport shoes with Nepal.

The kingdom tightened security in anticipation of possible demonstrations by Tibetan exiles.

``We will not allow any anti-China activities in our soil,'' senior Foreign Ministry official Janak Bahadur Singh. Some 20,000 exiled Tibetans live in Nepal.

Kathmandu, sandwiched between China to the north and India to the south, recognises China's sovereignty over Tibet and bows to Beijing's sensitivities over Taiwan.

China has governed the deeply religious Himalayan region of Tibet since its People's Liberation Army marched into Lhasa in 1950.

In early 1995, Nepal, fearing a possible objection from Beijing, refused to allow a planned peace march by Tibetans through Nepal from Dharmasala in northern India to Lhasa. The march was later called off by the Tibetan exiles.

Last month, at least two Tibetans fleeing their homeland were injured when Nepali police fired at them in a remote village in the Himalayan kingdom.

Jiang's visit to Nepal will be the third leg of a week-long trip to South Asia.

Last Friday, during Jiang's three-day visit to India, China and India signed an agreement aimed at reducing tensions along their Himalayan border where they fought a war in 1962.

In Islamabad on Sunday, Jiang discussed the continuation of peaceful nuclear cooperation with Pakistan during a meeting with his Pakistani counterpart, Farooq Leghari.