Despite a ban on foreign investment, foreign companies already have controlling interests in a number of China_s leading internet providers.

Internet use is booming in China

"We cannot ignore the disordered situation in the current internet financing market, which is dominated by foreign investors," a senior telecommunications official, Zhang Cunjiang, told China Daily's Business Weekly.

"Those already invested here must bear full responsibility for losses caused by clashes with government policy," he said.

But the official said the government was drafting new regulations that would gradually open up the market to outside capital.

Confused web policy

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.

Sohu.com is used by Chinese officials

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.