He would not say which companies were being considered or which lines of insurance they would encompass. Under the plan, licences would be granted upon China's accession to the WTO and a schedule would be rolled out for additional licences in the future.

"I think they will watch the companies and then open a little more," the source said. Two US companies are now permitted to provide insurance in China and adding three more would still fall short of demands made by the industry.

Brad Smith, an industry representative travelling with US Commerce Secretary William Daley on a five-day visit to China, said US insurance companies wanted full ownership rights, a broad expansion in market access and fairerlicencing.

Only a handful of foreign insurers have licences to operate in the rapidly growing Chinese insurance market. All but a couple of them are restricted to a 50 per cent stake in joint ventures. Among US companies, only American International Group (AIG) and Aetna have business licences.

AIG has wholly owned branches offering life and property insurance in Shanghai and Guangzhou, while Aetna has a life insurance joint-venture in Shanghai. China restricts foreign insurers to those two cities.

The industry has also pressed China to drop its policy of doling out licences on a country-by-country basis -- a policy that has resulted in only eight foreign firms being allowed to sell policies in China.

"Our objective is that everybody who meets the criteria should have a licence," said Smith, international relations director with the American Council of Life Insurance.

Smith said property and casualty insurance companies were pushing for access to the whole of China right away, since their keycustomers are multi-national corporations with offices scattered around the country.

For life insurance "we'd be happy with the 24 banking cities," he said, referring to the cities where foreign banks are allowed to open offices.

Smith said insurance was a "bottom-line issue" in China's bid for WTO membership. Daley said on Tuesday Washington and Beijing were "not that far apart" on an agreement.

There are 20 US insurance companies that have opened representative offices in China and are lobbying for licences.

Other companies with licences include Japan's Tokio Marine & Fire , Canada's Manulife, Australia's Colonial Mutual Group, Britain's Royal & Sun Alliance Group Plc, Germany's Allianz and France's AXA. Chinese insurers have a comparatively tiny capital base, so they can underwrite only a fraction of premiums generated in China themselves and must take the rest to overseas markets.

Foreign investors, unable to find adequate insurance cover in China, often skirt Chinese regulations and gooverseas. They argue an open market would allow Chinese partners to mop up premiums and capitalise investment funds in infrastructure. Total premium income in China in 1998 was around $15 billion.