KFC has more than 2,000 stores dotted around China's 465 cities, according to Su. It is expanding at the rate of one store a day, reaching further into counties. McDonald's also plans to have 1,000 stores in China by the end of 2008.

Chinese fast food chains are resorting to venture capital and the capital market, as inadequate funds are a big stumbling block.

Last March, for the first time, Ajisen Ramen, a Chinese fast food chain, got listed in Hong Kong. Lihua Fast Food and Daniang Dumpling have set a timetable for their initial public offerings. Lihua Fast Food raised $10 million and Kungfu Catering raised 300 million yuan from venture capital funds last year for expansion.

At the same time, foreign fast food chains are now looking to cater more to the local palate. For example, KFC now sells pumpkin porridge and youtiao (deep-fried dough) for breakfast, and egg soup and Beijing chicken rolls. McDonald's is changing from beef to chicken in its under five-yuan menu.

In 2005 Yum! Brands Inc. China Division launched East Dawning, a Chinese fast food chain serving typical regional food. After three years of "gaining experience" with 13 stores in Shanghai, East Dawning will be expanding nationwide in 2008.

Editor:Du Xiaodan