SHI TING

China looks likely to miss the World Trade Organisation deadline for opening up the direct-sales market to both foreign and domestic companies, state media reports say.

The Regulation on the Management of Direct Selling had not been submitted to the State Council's Legal Affairs Office for review, which would make it impossible to meet the WTO's December 11 deadline, the Legal Daily reported.

It normally took more than a month for proposed regulations to go through the legal affairs office before final approval, the paper said.

Officials at the Ministry of Commerce, which is drafting the regulation, confirmed they had yet to submit the draft documents.

"We're working around the clock trying to wrap it up before the end of the year," said an official from the ministry's Department of Treaty and Law.

"But we're still not sure whether we'll be able to pull it off."

Analysts say disputes over some provisions of the regulation, such as market-entrance and deposit requirements, had delayed the drafting process.

In an earlier version of the draft rules, floated at a national forum in September, both domestic and foreign companies would have needed registered capital of at least US$10 million.

"It's not a problem at all for foreign giants like Avon or Amway, but some domestic companies feel the threshold is a bit too high and they're lobbying hard to get it lowered," said a law professor at Peking University who is close to the drafting process.

The draft rules also required interested parties - both foreign and domestic - to have sales of at least US$60 million over the past three years.

"I think a differential should be made between domestic and foreign parties," the professor said. "Otherwise the [direct selling] market would become a monopoly of western multinationals."

Also under the draft rules, each operation must deposit at least 20 million yuan to cover potential damages and compensation arising from disputes with customers. Domestic companies have proposed the amount be lowered to 20 per cent of monthly turnover.

Direct selling was banned on the mainland in 1998 after a number of fraud cases. The government said it was hard to differentiate between direct sales and illegal pyramid selling, which could cause social unrest.

However, 10 big foreign direct sellers, including Amway, Avon, Mary Kay, Nu Skin and Herbalife, have continued to operate under a compromise rule requiring them to sell products through retail outlets and sales representatives.