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Walk down the high street at midday in any of mainland China's 630 cities and there's no mistaking the energy of feverish consumerism.

The country's 100 million-strong middle class, upwardly mobile and growing, is to be found buzzing around the latest special offers.

The size of China's high-earning bourgeoisie is predicted to double by 2010. No wonder consumer goods manufacturers are so excited. But the big question is, can the current crop of international advertising agencies operating here help these companies connect with their target groups?

Every ad executive in China worth his salt is bullish about the future of a market estimated to be worth $14 billion in 2004 (but some argue a figure of $9 billion is nearer the mark, if you include the huge discounts on offer).

And who can blame them? The State Administration for Industry and Commerce claims the mainland ad market (which excludes Hong Kong and Taiwan) grew by an average of 15 per cent a year from 1999 to 2003. China is expected to leapfrog the UK and Germany and become the world's third-largest ad market this year.

Incredible when you consider it was one-third of the size of the UK's in 2000.

Yet even the Chinese would admit the industry is beset with obstacles as it hurtles relentlessly on. The market is extremely price-sensitive, consumers aren't very loyal to brands and the average salary is just $1,000.

While it is true that the industry is improving and clients are taking advertising more seriously, most believe agencies are wasting their opportunity.

In fairness, it hasn't been easy during the seven or so years since brands have existed on the mainland. Most local companies are not prepared to invest in building a brand over the long term, so shun the attentions of international agencies. Local agencies, of which there are more than 80,000 in China, can undercut an international shop for the more popular short-term tactical sales push. But a bigger problem is that most international agencies are woefully short of creative talent.

Tom Doctoroff, the chief executive of JWT Greater China (and a veteran of ten years here), believes the only way for an agency to be profitable in China is for marketers to understand there are two standards: local, which subscribes to a quick-fix mentality, and the proven international standard of long-term brand-building.

Another big problem is that most ad industry leaders in China come from small markets - namely Hong Kong and Taiwan. Doctoroff says: "In non-scale markets, the way a good agency has to be structured to make a profit is to be flexible and react quickly to briefs, often at the expense of strategic creative work. In many cases, this system has been imported into China."

It should not be forgotten, though, that China did not receive foreign TV ads until 1979, when Leo Burnett first placed an ad for Marlboro cigarettes.

The industry is but young and there is still much to look forward to. This December, China will make headlines again when it opens its doors wider to honour its World Trade Organisation commitments, allowing international companies to set up wholly owned businesses for the first time.

So far, though, this hasn't been much of an issue, Joseph Wang, the Ogilvy & Mather China vice-chairman, says: Hong Kong-based agencies with a good track record are already able to open wholly owned agencies on the Chinese mainland under the Closer Economic Partnership Arrangement.

"Take an agency such as ours, we are a joint venture with Shanghai Advertising Limited, the biggest group in China," Wang says. "We have enjoyed a happy relationship for 13 years and we have been profitable for the past 12. They help us make connections and we deliver the numbers."

That Chinese marketers are still green to the practice of brand-building is the more worrying issue. While it has successful domestic brands, none to date have been able to create a global brand such as Japan's Sony.

Even so, Chris Clarke, the chairman of the Shanghai-based hotshop Nitro, who has been responsible for building brands such as Dove, Wall's ice-cream and M&M's chocolate in China in recent years, insists he has never seen a market so sensitive to branding.

"When brands get the right mix, the rewards are huge. There's no question about that," he says. "The spending power of the youth market is big and getting bigger. They love and are passionate about international brands."

However, Clarke warns: "It is still expensive to build a brand in China. Some of our clients take the view, as do I, that building a brand is going to get more expensive. If they invest now, it will be cheaper in the long run."

But some argue the real problem is wastage. The scale and complexity of China, with its myriad cultures and languages, means the national broadcaster, Central China Television, is the only proven medium to reach the majority of the country. It is said that if you appear on CCTV once, you will be famous. The same is said for brands.

Marketers are all too aware of this, which is why the CCTV auction of primetime ad slots, held in Beijing every November, is arguably the media event of the year. At the last auction, CCTV netted a record $634 million, an 18 per cent increase on 2003. Procter & Gamble finished top with a bid of $46 million. It was the first time a foreign multinational bid highest in the auction's 11-year history.

Doctoroff says that the inevitable inflation of media prices is not really a problem for clients in China yet, but it is a concern. He says it is possible to set up a reasonable three-city ad plan for TV and print for about $3 million to $4 million a year. "You are going to reach a lot of people, but you are also wasting a lot of those exposures," he warns.

One group marketers are eager to reach is the country's late teens and young adults. Although the majority of this group doesn't work, they are considered highly affluent because of the mainland's one-child policy.

With two sets of grandparents as well as parents, typically there are six adults supplying money to the one child.

This growing army of "little emperors" is usually flush with cash, particularly among the middle class, and ready to spend at fast-food restaurants (KFC is king in China) or on the latest gizmo.

Michael Wood, the managing director of Leo Burnett Greater China, says Chinese parents and grandparents do spoil their children, partly because they want them to have a better life than they did, but also because a child's success says a lot about the accomplishments of its family. This group is now entering a new workforce, one that is more market-driven and with higher salaries than any generation before them. "They are open to consume goods that were previously unobtainable," Wood says. "But their consumption is not to the detriment of the family, whom they will have to support in the future."

Wood says the pool for affluent young consumers will grow larger in future, when China implements its "15 gateway cities" plan, starting this year.

In the past, the focus of the central government has been to develop the four main cities: Beijing, Shanghai, Guangzhou and the Hong Kong border city of Shenzhen. The plan will see investment in infrastructure extended to second-tier cities including Xi'an, Nanjing, Wuhan, Qingdao and Dalian. All have populations of millions.

"As China moves to double its urban population to 70 per cent over the next 25 years, there will be a need to rebuild and extend existing gateway cities," Wood says. "China has more than 120 cities with a population of more than one million and 35 cities with more than six million. Populations the size of Europe and North America will be on the move, creating new markets that will expand by more than 20 million people every seven years."

Clarke says the provinces are where the first-tier cities were ten years ago. They will catch up, although they are woefully underdeveloped, making the creative needed much more product-focused. "In tier-one cities, it is about an emotional link with brands. They get the products now," he says. "We have started to see companies and agencies create different commercials for different stages of a brand's development. But right now there are only a few companies that understand the true value of a brand."

Despite the pitfalls ahead in what is still essentially a nascent market, the enthusiasm of advertising executives here is infectious. Last month, a Gallup survey found urban annual incomes had risen 75 per cent between 1997 and this year to almost $3,000 annually - an amount that buys much more in China than it would in the US.

And with a younger leadership now running an unapologetically pro-business government, it is clear that China is making economic construction the central task for its future. China's economic growth over the past 25 years is probably the largest, most sustained period of wealth creation in history. China is re-establishing its role as the Middle Kingdom, one of the most stout pillars of the world economy.

Many opportunities will open up for the country's agencies over the next ten years as China invites the world in and Clarke says everybody in its ad industry believes in the same dream. "Our reality is that China will become an economic superpower and there will be a long-term, sustainable industry that will be rewarding for many."