After a furious round of diplomacy led to China allowing the team through its air space, the balloon crew pressed on with their attempt to set the world record.

By 1340 GMT Mr Branson and his co-pilots were still in Chinese air space and heading for South Korea.

The balloon was cruising at around 28,000ft at longitude 117 degrees east, latitude 35 degrees north.

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Favourable winds meant the trio were on course to cross the East China Sea and South Korea, after fears they could be carried over North Korea, which had also refused permission to enter its air space.

"They're going up and down, chasing the jet stream," said a spokeswoman for the ICO Global Challenge.

"They were on quite a slow jet stream and they're trying to get onto a faster one."

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Telephone links to the capsule went down on Tuesday night after 270kg of ice had gathered on the balloon.

Mr Branson and his two co-pilots, the American Steve Fossett and Swede Per Lindstrand, were heading towards South Korea and then southern Japan before starting the long journey over the Pacific Ocean.

The about-turn by Beijing came after a flurry of meetings and pleas from Britain for the balloon to be allowed to continue.

A British diplomat in Beijing said the Chinese foreign ministry had rung the UK's ambassador to give permission, but "requests that it leave Chinese airspace as soon as possible".

Take-off: The balloon starts its epic voyage

The balloon strayed into a Chinese no-fly zone after being forced to alter course by US and British air strikes on Iraq.

Chinese officials, worried about safety considerations in the busiest area for air traffic control, at first insisted the balloon land in the Tibetan capital Lhasa. But project leaders and British officials said it could not comply because of safety concerns.

UK Prime Minister Tony Blair has sent a personal message to Beijing expressing gratitude for the assistance given so far and asking for China's help to allow the balloon to pass through the country safely.