But the official said the government was drafting new regulations that would gradually open up the market to outside capital. There is widespread confusion over Beijing's telecommunications policy as some foreign Internet companies have been able to defy the ban restricting foreign investment in the industry. Telecoms is one of the key areas of dispute in talks with the United States and Europe on China's accession to the World Trade Organisation.
Foreign investors have already gain a foothold in China's internet market.
Some of the country's leading portal sites are backed by foreign firms such as Yahoo, Microsoft, Intel and Compaq. The Internet in China is still in embryonic form, but its use is growing rapidly. The number of Internet users nearly doubled to around four million in the first six months of 1999, and the Ministry of Information estimates there will be around 9.4 million users by 2002. The BBC is not responsible for the content of external internet sites.