Direct sellers await market opening
(China Daily)
Updated: 2005-01-13 08:55

Foreign direct-selling companies have the patience to wait for the opening-up of the sector in China if delayed rules bring positive outcomes, said officials from the World Federation of Direct Selling Associations.

The federation is also discussing the establishment of a direct selling association in China once the related regulation is issued, said Neil H Offen, secretary-general of the federation.

The federation held its CEO Council meeting in Beijing yesterday. It gathered top executives from 18 direct selling companies around the world, including Amway, Avon and Marykay.

Offen said the federation is concerned about the delay of the regulation.

"But since the regulation is very complicated, the companies will be patient and wait for it," he said.

Publication of the rules failed to take place as scheduled on December 11, due to a number of minor changes and procedural issues.

China promised to remove a ban on direct selling as part of its World Trade Organization commitments, but the absence of rules made the opening-up impractical.

The government has made great efforts in writing the rule since the beginning of last year.

The federation and its members paid close attention to the draft.

The federation last summer gave references to the Chinese Government about how the industry operates in other countries. The US Direct Selling Association also submitted proposals to the Ministry of Commerce and State Administration of Industry and Commerce.

"The regulation has been discussed for revisions for months. We hope it could bring positive changes to the industry in China," said Dick DeVos, chairman of the federation.

He said he expected the regulation would give birth to maximum competition in the industry and maximum protection for consumers and salesman.

Foreign companies have made preparations to run their direct selling businesses under the unique provisions provided by the regulation, he said.

But he refused to comment on specific elements of the draft regulation, only saying some of the provisions in the draft regulation were quite unique to China.

The draft rule requires that direct sellers in China have at least 80 million yuan (US$9.67 million) in registered capital.

The direct selling companies have to pay a deposit of 20 million yuan (US$2.4 million).

The draft also has requirements on the number of fixed retailing stores and minimum business revenue.

Offen said people in the sector hoped they could have a comment period after the regulation is issued.

It is the third meeting of the federation's CEO Council, which has been held in the United States and Europe in past years.

DeVos said they selected Beijing not because of the importance of the Asia-Pacific market, but because China is a market emerging with great significance in the world.

DeVos said the direct-selling business now has an annual value of US$90 billion in the world and has 50 million salesmen.

The business will continue to experience considerable expansion in the future, he said.

China imposed a ban on direct sales in 1998 because it is hard to differentiate direct sales from so called "pyramid sales," which had led to widespread fraud, consumer losses and social disorder.

Ten foreign-funded direct-selling companies were allowed to continue their operation in China after the 1998 ban, but they had to change their sales mode to selling goods through fixed outlets and sales representatives.

Close