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China may have one of the world's fastest-growing advertising markets, but the international agency networks are far from dominant - despite a presence that, in some cases, stretches back decades.

At the recent Results International conference in Shanghai, Publicis China's chief executive, Neil Hardwick, said he estimates that less than 12 per cent of China's above-the-line advertising is created by international agencies. TV still drives the market, with a 78 per cent share of spend, but the vast majority of ads are not the craft of the multinationals.

This doesn't mean that network chiefs who rave about China have overestimated the market's potential. The networks may have a small share of the market, but it's a $10 billion pie and most of the larger creative agencies are thought to be profitable.

It's also a fragmented market. While around 20 networks compete for a small slice, around 10,000 local agencies are feeding off the rest of the pie.

The multinationals, with their emphasis on long-term brand building and strategy, struggle to grow their share in a fast-moving and sales-dominated market. "Many local advertisers just don't want what we do," Hardwick says. "The big agencies in China are structured to deliver against their big Western clients. There are also local clients who want some or all of that service, and they're the ones who migrate to Western agencies, but there are many who aren't ready for that."

It doesn't help that Chinese advertisers that use global agencies, such as Haier and Lenovo, spread the work between a large number of local and foreign shops and change agency with alarming frequency.

Long-term relationships, such as those between Leo Burnett and the sportswear company Li Ning, or JWT and the ad magazine LongYin Review, aren't common.

"Relationships are often dependent on the enlightenment of one marketing leader, so the political intrigue that can suddenly sweep people out of power is unsettling," Tom Doctoroff, JWT's North-East Asia director and chief executive of China, says.

Local shops are faster and cheaper in areas such as sales promotion.

This has given rise to the trend for multinational clients to use a network as their core agency but use local shops for below-the-line work.

Local agencies also proliferate in areas outside the markets of Shanghai, Beijing and Guangzhou that the networks have yet to reach. However, some networks are following their clients into the provinces. JWT has a small office in Chongqing, servicing Ford's joint venture with Changan Automotive Group, and Saatchi & Saatchi has set up in Qingdao after winning Haier's Olympics sponsorship account. Meanwhile, Ogilvy & Mather, which recently opened an office in Xiamen, plans to grow by buying agencies beyond the big cities.

But many China-based agency chiefs say setting up offices in smaller cities isn't the best way to grow. There's no guarantee of picking up local business and there's the issue of conflict with established and incoming international brands. But Ogilvy China's vice-chairman, Joseph Wang, believes local agencies provide a platform to build valuable relationships with local clients, such as the recently won Agricultural Bank of China, and help Western agencies to learn more about China's provincial middle class.

A more popular strategy is for networks to increase the range of services they offer - by rolling out their marketing services offshoots in China.

"Specialised skills such as interactive and events marketing create value that sets us apart from the local competition," Donald Chan, Leo Burnett's national managing director, China, says.

Meanwhile, a growing number of independents, such as the Shanghai-based Nitro, and start-ups, such as the former Grey China chief Viveca Chan's WE Group, are making inroads.

Chan, who has partnered with ten local shops, is establishing what she hopes will be the first global Chinese ad network with local market efficiency and international expertise.

Nitro's Stephen Drummond says: "Clients used to gravitate to multi-nationals because of fear of the unknown. But companies such as Nike, Mars and Unilever (all Nitro clients) have been here for 15 years and don't need hand-holding."

Indeed, Nike's recent decision to drop JWT and go with its US creative agency Wieden & Kennedy in China suggests advertisers are aware of a range of options. This makes it more important for networks to focus on quality and depth of services and grow with their global clients, rather than localise and spread themselves too thinly. Doctoroff believes the prospect of local clients going global is still a distant one. "No local brand is closer than light years away from being able to export its equity," he says.

In the meantime, growth will come as more international clients enter the market and local advertisers start to show more faith in brand building.

CHINA'S TOP TEN INTERNATIONAL AGENCIES AGENCY BILLINGS 1 Shanghai Leo Burnett (RMB4.2bn) 2 Saatchi & Saatchi International (RMB3.1bn) 3 McCann Erickson Guangming (RMB2.8bn) 4 Beijing Dentsu (RMB2.5bn) 5 Shanghai Lowe (RMB590m) 6 Guangzhou JWT (RMB306m) 7 Shanghai ADK (RMB282m) 8 Shanghai Hakuhodo (RMB132m) 9 Shanghai TBWA (RMB111m) 10 Shanghai Dai-Ichi Kikaku (owned by ADK) (RMB109m) Source: China Advertising Association (ranking by billings) 1RMB = 7.1p at time of publication.

There are no accurate agency rankings for China but it's accepted that Ogilvy & Mather and Dentsu are the biggest in Beijing, while a number of shops jostle for the top spot in Shanghai and Guangzhou, including Leo Burnett, JWT, ADK and Lowe. McCann Erickson and Saatchi & Saatchi are also thought to be high up the chart while TBWA and Publicis also have a significant presence. WPP is the biggest group with a 15 per cent share. The China Advertising Association publishes official agency rankings but these are based on taxation of Sino-foreign joint ventures and local agencies and don't reflect the true picture. In the chart, Saatchis' figures include ZenithOptimedia's billings, owing to the way the companies have been set up, and Leo Burnett includes Starcom.