The Chinese Government's latest move concerning the drafting of direct-selling rules has won applause among direct-selling enterprises.

The State Council approved, in principle, drafts of the rule on direct-selling management and the rule on banning pyramid selling on Wednesday, the Chinese media reported yesterday.

"We are happy to see this progress," Xie Dan, a PR official with the US-based direct-seller Amway (China), told China Daily yesterday.

Firms have been waiting for the regulations for a while according to its WTO commitment, China promised to open up its direct-selling business from last December.

China has seen direct sales before. In 1998, it imposed a ban on them, as widespread "pyramid sales," often difficult to differentiate from direct-selling, had led to fraud, consumer losses and social disorder. After the 1998 crisis, only ten foreign-funded direct selling companies were allowed to continue operating in China.

"The long-awaited rules are likely to be issued in a month when the Ministry of Commerce has made some slight amendments," said Wang Yi, an industry expert and professor with the Beijing Institute of Business Management.

The Ministry of Commerce refused to comment yesterday.

"We are looking forward to the official publication of the rules," said Han Zhiyuan, a PR manager at Nu Skin Enterprises.

He said the company may adjust its business strategies in China in accordance with government regulations.

"There are some major changes in the drafts approved by the State Council," Wang said.

The draft rules require that the proportion of payment to sales promoters will not exceed 30 per cent of the income generated from sales, not 25 per cent as was previously said. The draft also removes the limitation on the number of fixed stores that each provincial branch of direct sellers must open. But each firm must still have at least one store.

However, there are still high market access requirements like a registered capital of 80 million yuan (US$9.7 million) and a deposit of 20 million yuan (US$2.4 million), Wang said.

(China Daily 08/12/2005 page10)