China is to allow foreign travel firms to establish solely owned agencies from next month in a move to meet WTO commitments.

Foreign firms will also be allowed to take controlling stakes in joint ventures, according to the country's tourism regulator.

Foreigners will be able to operate in five major cities - Beijing, Shanghai, Guangzhou, Shenzhen and Xian - and at government designated resort areas, the National Tourism Administration said on its website.

The new provisions would come into effect in 30 days, the regulator said in a circular dated June 12.

The government promised to prise open its lucrative tourism market to foreign players under the terms of its entry into the World Trade Organisation (WTO) in December 2001.

It has said it will allow foreign partners in joint ventures to hold majority stakes by this year and allow fully foreign-funded companies by 2005.

China has already approved at least a dozen Sino-foreign joint venture travel agencies.

Foreign-controlled companies would be barred from organising tours of Chinese citizens travelling overseas or to Hong Kong, Macau and Taiwan, the circular said.

Only foreign companies with annual revenues of US$500 million (S$865 million) or more would be allowed solely owned agencies and those seeking a controlling stake in a joint venture would have to have revenue of at least US$40 million, it said.

Foreign firms normally would be limited to establishing one venture with registered capital of no less than four million yuan (S$837,000).

Meanwhile, the European Union's top trade official, Mr Pascal Lamy, arrived in Beijing on Friday for a two-day visit.

He said China was falling behind in some of its commitments to the WTO and needed to clarify opaque laws and practices that violate those agreements.

'We need to reduce the gap between law and practice,' he told reporters on Friday following a day of meetings with Chinese officials.

Rules for foreigners buying Chinese companies, for instance, needed clarification.

But he noted China was meeting timetables for lowering tariffs on imports, creating 'a tangible benefit in terms of market access'.