The decision came after the Dalai Lama, Tibet's spiritual leader and a vegetarian for almost 40 years, had appealed to KFC in May not to expand into the region.

"I've been particularly concerned with the sufferings of chickens for many years," the Dalai Lama said in his appeal.

Yum, which faced opposition from groups that protest against Chinese control of Tibet, first announced plans to expand into Tibet in January. In April, it said it was studying the market.

"We did look into entering Tibet earlier in the year, but we decided not to move forward because it isn't economically feasible for us to do business there today," Yum spokesman Jonathan Blum said. "Maybe someday it will be less costly and we'll continue to explore this option at that time," he said.

China is Yum's fastest growing and most profitable country outside the United States. There are around 1,100 KFC outlets in China, from the far western region of Xinjiang to the frigid cities of the northeast and down to the tropical south. China accounted for 32 percent of Yum's international operating profit of $436 million (239 million pounds) in fiscal 2003.

Louisville, Kentucky-based Yum, which also operates the Pizza Hut and Taco Bell chains, is one of a handful of Western companies to receive permission from Beijing to expand into Tibet, where Chinese troops forcefully imposed their government's rule in 1950.

China has long sought to silence pro-independence voices in the region and exiled the Dalai Lama in 1959 after accusing him of inciting separatism.

DALAI LAMA LETTER

Pro-Tibetan groups, including New York-based Students for a Free Tibet, decried Yum's plans to open one of its KFC outlets in Tibet, portraying it as an instrument of imperialist China.

Animal rights group People for the Ethical Treatment of Animals on Thursday publicised a Dalai Lama letter dated June 22 to Yum Chief Executive David Novak asking the chain to abandon its plan to expand into his homeland.

Yum said it had not received a letter from the Dalai Lama.

Tashi Wangdi, the Dalai Lama's representative in New Delhi, told Reuters the letter was a May 14 general appeal to KFC not to start doing business in Tibet, not a letter addressed to Yum's Novak. The text of PETA's letter was identical to the appeal, though, he said.

"We regret to find that the general appeal made by His Holiness was rearranged into a letter directly addressed to Mr. Novak," he said. "We strongly object to the changing of the nature of the appeal without seeking approval."

PETA has used statements in the Dalai Lama's name in other recent campaigns, including a 1998 effort to change the way street dogs were treated in Taiwan.

"It was the death of a chicken that finally strengthened my resolve to become a vegetarian," the Dalai Lama's letter said. The death occurred in 1965 when the Dalai Lama saw a chicken slaughtered in the kitchen of a government guesthouse in south India, the letter said.

"It is therefore quite natural for me to support those who are currently protesting against the introduction of industrial food practices into Tibet that will perpetuate the suffering of huge numbers of chickens," the letter concluded. Yum has said it wants to "own China", opening new stores at a blistering pace of 250 to 300 outlets annually. Yum is expanding its Taco Bell outlets outside the commercial hub of Shanghai.

The chain says it has experienced no decline in profit margins as it expanded into the country's hinterlands. To cater to Chinese tastes, KFC introduced a Beijing-style chicken wrap last year, complete with spring onions and hoisen sauce. Yum's chain's in China include KFC, Pizza Hut, A&W and Taco Bell. The KFC chain currently runs outlets in 230 cities in all Chinese regions except Tibet.