On January 18, Shao Qiwei, director of China National Tourism Administration (CNTA), announced that foreign travel agencies would be permitted to set up branch offices nationwide from July 1, 2007 as part of a commitment the country made to the World Trade Organization (WTO) to open the tourism sector by 2007. The move wins a warm welcome from both experts and foreign companies.

Establishment of branch offices had been forbidden to foreign companies except in the cities of Beijing, Shanghai, Guangzhou, Shenzhen and Xi'an. "The deregulation is meaningful. They (foreign companies) could strengthen networks, reputation and brand awareness here," said Li Mingde, senior researcher with Tourism Study Center at the China Academy of Social Sciences.

"This means that travel industry will then be fully open six years after China's accession to the WTO, as scheduled," said Liu Zinan, director of sales and account management with Hogg Robinson Group (HRG) China. "We appreciate what the CNTA has been doing in opening up the market."

HRG, one of the top-three business travel agencies worldwide, entered China in 2004, setting up the only foreign-funded travel management company in the nation with a majority stake when it joined hands with Shanghai Jinjiang International Hotel Group.

"The same as with other foreign invested travel agencies, we are planning to have branch offices around China," Liu said. However, there are still stumbling blocks on the way to local business expansion. Air ticketing license approval is one of them. To run travel business in China, international travel agencies need air ticketing licenses in addition to travel agency licenses.

The General Administration of Civil Aviation (CAAC) has given ticket licensing rights to the China Cargo Transportation Association. Under the current regulations, full ticketing licenses can only be awarded to travel agencies that are wholly or mostly Chinese owned.

"This means we can neither get tickets for domestic flights nor can we conduct business there even if we set up branch in a city until we rent the air ticketing license from a local company or take a partner," Liu explained. And the computer reservation system is another headache. TravelSky, a monopoly with major domestic State-owned air carriers as equity holders, is the only entity that the CAAC permits to issue tickets for travel agencies and air ticketing companies.

And the international computer reservation system known as Global Distribution Systems (GDS), which is believed to be more technologically advanced, is also not permitted to issue tickets. The outbound tourism sector is also a restricted area for international players in China. But according to Liu, the regulation restricts leisure travel agencies, not foreign business travel agencies like HRG and American Express.