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The State Council, China's cabinet, approved in principle draft regulations on direct selling and the ban on pyramid selling on Wednesday, according to China News Service yesterday, a move well-received by businesses and experts alike.
"We are happy to see this progress," Xie Dan, PR official from joint US-China venture Amway (China), told China Daily yesterday.
Firms have been waiting for the regulations as, in line with its WTO commitments, China promised to open up its direct-selling business from last December.
In 1998, a ban was imposed as widespread pyramid sales, often difficult to differentiate from direct selling, had led to fraud, consumer losses and social disorder. After this crisis, only ten foreign-funded direct selling companies were allowed to continue operating.
"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 at Beijing Institute of Business Management.
The ministry refused to comment yesterday.
"We are looking forward to the official publication of the rules," said Han Zhiyuan, 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 would require individuals' commissions not to exceed 30 percent of income generated from sales, compared to 25 percent as was previously supposed. They would also reduce the minimum number of fixed stores each direct seller's provincial branch must open to one.
However, there are still high market entry requirements like registered capital of 80 million yuan (US$9.7 million) and a deposit of 20 million yuan (US$2.4 million), said Wang.
(China Daily August 12, 2005)
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