Li discussed economic cooperation, trade, tourism, and other matters of mutual interest with his Nepalese counterpart Ramesh Nath Pandey, the Nepalese foreign ministry said.

He was later to meet with Gyanendra at the royal palace and attend a dinner with Nepalese officials Thursday night.

The two-day visit will be closely watched by Nepal's powerful southern neighbour India for any hints China will seek to sell military equipment to help the country fight a Maoist rebellion that has claimed more than 11,000 lives since 1996.

India, along with Britain, cut military supplies to Nepal following Gyanendra's February 1 sacking of a four-party coalition government. Joined by the United States and European Union, it has called for the restoration of democracy.

Nepal, a landlocked Himalayan nation between India and China, has declined offers of military aid from Pakistan. But officials in the Gyanendra-led government have said the country would seek other sources of military supplies.

China, which supplied arms to Nepal in the late 1980s, has termed the takeover a Nepalese internal matter.

Upon his arrival in the capital, Li declined to answer a question about whether China would sell military supplies to Nepal.