Western admen have cut a long trail of missteps in Chinese markets, dating to a 1960 spot in Taiwan that translated "Come alive with the Pepsi Generation" as "Pepsi will bring your ancestors back from the dead." More recently, Chinese readers erupted in anger at a 2003 Toyota print ad that showed two stone lions, emblems of Chinese culture, saluting a Prado SUV. Last year a Nike ad featured NBA star LeBron James vanquishing a kung fu master and a dragon, a traditional symbol of the Chinese state. Beijing banned the ad for failing to "respect the motherland's culture." Nike apologized, and its new ads show teens turning everyday events like a flower delivery into sporting opportunities.

China's market is changing so fast, admen pitch to a moving target. International agencies are booming in China, yet scrambling to keep up as multinationals from Intel to Ford branch out of Beijing, Shanghai and Guangzhou, and into the interior. There they encounter local competitors with a firm marketing grip on local tastes. Edward Bell, head of planning at Ogilvy and Mather's Beijing office, part of a China team that has doubled in size since 2000, says admen now think of China as a single market with many different commercial cultures--more like Europe than America. The winning advertisers are likely to be the ones who understand these trends best.

Consider the sneaker wars. To deal with the diverse market, Adidas recently beat out Nike and a Chinese rival with a reported $80 million bid to become the sportswear sponsor of the 2008 Olympic Games, an event with the rare power to unite China. Meanwhile, to circumvent clubby local distribution channels, Adidas has been opening its own stores at the rate of more than one a day, and now has 1,300 across China. The stores focus on eye-catching promotions to stand out against the "gray, gray, gray" storefronts of most Chinese cities, says Aldo Spaanjaars, Adidas's head of China marketing communications. Nike is building its own stores even faster, but Adidas sales in China have doubled in the past two years.

Short of a one-off spectacle like the Olympics, it's hard to find sales themes that appeal across China. Even between urban centers there are big differences, says Bell, with Shanghai attracted to wealth and status, and Beijing to quality. Those distinctions are also increasingly vital to Mindshare, the media-buying arm of WPP, which has seen its Beijing office grow from 53 to 180 employees in the past 18 months. Quinn Taw, Mindshare's China director, says that a recent Ogilvy spot for Fanta, which showed a Chinese high-school teacher taking a sip and rocketing gleefully into the air, played better in southern China than in the north, where "humor tends to be based on wordplay" rather than slapstick.

The biggest challenge to Westerners comes from local advertisers. Taw says about 65 percent of advertising on China Central Television is created by Chinese firms. They are rising alongside Chinese producers. Five years ago, Motorola, Nokia and Sony Ericsson were the only players in China's cell-phone market. Now there are more than 30, mostly small Chinese regional operations. "Local firms," Taw says, "often have friends who manage stores or run local media stations." That can mean they get prime floor space while foreign products get stuck in a corner.

Adidas's flashy storefronts are one answer. Coca-Cola found another when it started paying some China sales reps on commission about five years ago. That increased the number of Coke coolers and umbrellas in prime locales. The company also began roadshows, handing out free samples and providing entertainment to rural customers.

Still, no outsider can have a truly local touch. The Chinese firm East West proved that when it beat out four multinationals for an Electrolux portfolio. One East West ad featured Electrolux appliances including a stove-top fan that whisks away the billows of smoke from a stove. The happy owner picks up a sledgehammer and knocks down the wall between her kitchen and living room. The ad shows an intimate knowledge of China, from the way chefs cook to the deep desire for space and freedom. The idea, says Hong Yan, co-owner of East West, is that like society, "the kitchen is open." It's hard to imagine Madison Avenue ever understanding the Chinese dream that well.