Overseas investors are to be allowed to set up wholly owned travel agencies in the country two-and-a-half years ahead of the schedule agreed with the World Trade Organization (WTO), according to an official notice issued at the weekend.

The first wholly overseas-owned travel agency could start operating in July, industry experts predicted.

The China National Tourism Administration and the Ministry of Commerce issued a provisional rule on Saturday, lifting the ban on setting up travel agencies in China that are controlled or wholly owned by foreign entities.

The rule will be effective 30 days after its issue, meaning July 14.

When China joined the WTO in December 2001, it agreed to allow the establishment of wholly overseas-owned travel agencies by the end of 2005.

Under the rule announced last Saturday, overseas investors will be able to set up travel agencies in State Council- approved national tourism zones in Beijing, Shanghai, the cities of Guangzhou and Shenzhen in South China's Guangdong Province, or Xi'an in Northwest China's Shaanxi Province.

But such travel agencies will not be permitted to arrange tours for Chinese mainland citizens to foreign countries or to the Hong Kong and Macao special administrative regions or Taiwan Province.

Their business is expected to be restricted to visits to the Chinese mainland of foreign tourists and tours within the Chinese mainland by Chinese tourists.

In normal circumstances, each overseas investor will be given approval to set up in China only one travel agency that is controlled or wholly owned by it, the provisional rule stipulates.

Overseas applicants wanting to establish a travel agency in the country, in which they would have a controlling stake, must be engaged mainly in the tourism sector, be members of their own national or regional tourism industry association, have an annual business turnover of at least US$40 million and have both a good international reputation and advanced agency management skills.

Applicants who want to set up a wholly owned travel agency must have an annual business turnover of at least US$500 million.

The travel agencies must have a registered capital of at least 4 million yuan (US$483,000), whether they are controlled or wholly owned by a foreign firm.

Applications will be processed in the same way as those for other overseas-funded travel agencies are examined and approved, as stipulated in the revised Rule on Travel Agencies, said the notice.

The China Travel Service and Germany's TUI Shareholding Co Ltd set up China's first pilot foreign-controlled joint-venture travel agency in Beijing last November.

The country already allowed foreign investors to set up minority-holding co-operative travel agencies in the country, a move that took place months ahead of schedule as it was due to be implemented at the end of this year.

China has approved the establishment of 11 overseas minority-holding joint-venture travel agencies. Overseas investors have come from France, Japan, Singapore, Switzerland and the United States, as well as Hong Kong and Macao.