Cosmetics giant Avon Products Inc said on Friday it had won government approval to test direct- selling in three regions beginning this month.

Avon was the only firm to get such permission from the Ministry of Commerce while global rivals such as Amway and MaryKay failed.

Analysts believed the approval was rooted in the government's appreciation of Avon's abidance with related rules in China and its favored business model.

The testing, which was called a historic milestone by Andrea Jung, Avon's chairman and CEO, will take place in Beijing, Tianjin and Guangdong Province.

"The objective is to help the government find a suitable direct- selling model that fits the needs of Chinese consumers, promotes social stability and helps protect consumers against illegal practices," Jung said.

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

Ten foreign-funded direct-selling companies, including Avon, were allowed to continue operations in China after the ban, but were forced to change their sales mode and focus on retail outlets and sales representatives.

The Ministry of Commerce has been drafting rules on direct-selling since last year in order to reopen the sector. But the rules, which should have been finalized before December 11 last year according to the country's WTO commitments, have yet to be released.

An analyst from the State Council Development Research Centre said the majority of the rules have been set, except for the ones concerning business models.

(China Daily April 9, 2005)