In April 1998, China banned direct selling. Seven years on, its people outlay billions of dollars annually on famous brands such as Amway, Avon and Mary Kay. The State Council is now considering lifting the ban that's due to be promulgated in the next two months.
'Worldwide, the direct selling industry employs 45 million people with annual revenue of US$85 billion,' said Corey Lindley, president of Greater China for Nu Skin Enterprises. 'By 2010, we expect China to be the equal of the world's two biggest markets, Japan and the US, accounting for 20-30 per cent of global sales and employing five to 10 million people.'
Direct selling has had a chequered history in China. Starting with Avon ladies in Guangzhou in 1990, it boomed in the mid-90s, attracting thousands of people who saw an opportunity to make money through their own hard work and enterprise. Major foreign firms, mostly from the US, entered the market and set up national networks. As a condition of entry, Beijing insisted they sell products made in factories in China, one of the few countries in the world to make such a requirement.
Foreign and domestic firms offered cosmetics, health products and keep-fit equipment, selling through recruits, both full-time and those doing a second job. But the business led to widespread fraud and cheating, with pyramid sales and companies taking deposits but not delivering products, or selling goods that were defective.
The frauds became so serious that they led to rioting and disorder in several cities and persuaded the central government to ban the practice on April 21, 1998.
The ban stunned the foreign firms, which argued that they had done nothing illegal. With help from the US government, they persuaded Beijing to allow 10 to continue selling through retail outlets, with a limited amount of direct sales.