(ADDS remarks at banquet) - by Kedar Man Singh

KATHMANDU, Dec 4 (AFP) - Fears of demonstrations by Tibetan refugees prompted extra security for Chinese President Jiang Zemin's visit here Wednesday, sources said.

Jiang was not driven to Royal Palace in the traditional six-horse state used for other top leaders, such as President Roman Herzog of Germany last week, a municipal source said.

The cancellation of the coach ride was part of a package of measures to prevent anti-China protests marring Jiang's 24-hour visit.

The Nepalese capital is home to more than 25,000 Tibetan refugees who have staged demonstrations in the past calling for Tibet's liberation from Chinese rule.

The authorities have preventively detained some Tibetan youth activists who support exiled Tibetan spiritual leader, the Dalai Lama, Home Ministry sources said.

Speaking at a banquet hosted by King Birendra, Jiang said: "It has been our firm state policy to develop good neighbourly and friendly relations with all the South Asian countries".

Jiang's Nepal visit follows trips to India, where Tibetan protestors staged noisy demonstrations, and to Pakistan.

China and Nepal have long been close and friendly neighbours Jiang told the King. "There is no problem that remains unresolved between our two countries," he was reported to have said.

China hopes Nepal will turn out more marketable products to increase its exports to neighbouring Tibet, thus alleviating the Sino-Nepalese trade deficit, Jiang said in an interview published here, as quoted by the official Chinese news agency, Xinhua.

Prime Minister Sher Bahadur Deuba and communist opposition leader Mana Mohan Adhikari met Jiang separately at the Royal Palace, an official source said.

A formal agreement on Sino-Nepalese scientific and technical cooperation was also signed in the evening by Chinese Trade Minister Wu Yi and Nepalese Commerce Minister Fatya Singh Tharu.

Under the agreement, China will offer 10 million dollars for the construction of an indoor stadium, which will include international-grade swimming and badminton facilities.

The stadium is to help Nepal host the South Asian Association for Regional Cooperation Games next November. About 3,000 South Asian athletes from Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka will participate in the games.

A Chinese spokesman said China had agreed to provide the aid as grant to mark the 25th anniversary of King Birendra's accession to the throne, which fall on January 31, 1997.

Jiang is accompanied by a nine-member official entourage that includes Wu as well as Foreign Minister Qian Qichen.

Qian and Nepalese Foreign Minister Dr. Prakash Chandra Lohani met separately for over an hour.

Jiang's visit was also expected to result in the start of some public-utility projects such as construction of mountain highway links with Tibet.

The building of the 114-kilometre (72-mile) Kathmandu-Kodari highway a link to the Tibetan capital, Lhasa, in the late 1960s by China was seen by New Delhi as a threat to India's security.

The atmosphere is seen as less tense now, however, Nepalese sources have said.

India and China fought a brief border war in 1962.

Jiang is due to return to Beijing Thursday morning after laying wreaths at a martyrs' memorial here.