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Shenzhen may be a lovely place to visit, but I wouldn't know. Like many tourists to this southern Chinese boomtown, I barely got past the first shopping mall after the border crossing, Luohu Commercial City, an emporium of counterfeit goods at bargain prices. On its six floors, you can purchase nearly anything: handbags, golf clubs, watches, couture dresses, even pharmaceuticals. But be sure to hit the ATM first.

The Chinese are believed to have issued the world's first paper currency around 600 A.D., and fourteen centuries later, cash remains king. Cars and houses are bought, and even salaries are often paid, with thick envelopes of bills. To date, banks have issued only slightly more than 50 million credit cards to a population of 1.3 billion, according to a recent study done by the payment processing company First Data International. Credit card debt remains minimal — 85% of cardholders pay the full balance off each month. By comparison, Americans possess 640 million cards — more than double the population — with the average card-holding household owing an estimated $9,500.

One reason for this disparity is that only 4% of merchants in China even accept credit, concerned that handling fees will eat into already tiny margins. Nowhere is that more clear than Luohu Commercial City. By its very nature, such a robust trade in fake products couldn't survive without cash. Shopkeepers make change from wads of renminbi stuffed in suitcases or pockets. At the few stalls that do accept plastic, it's not without an extra fee that can range anywhere from five to 20%. When, after six hours of shopping and short on funds, I couldn't even use my Amex to pay for dinner. "Cash only," the waiter insisted.

Even those in China who do have plastic rarely use it to buy much. Less than 50% report using it to purchase anything, and most who do spend less than $1,000 a year, an amount many Westerners can blow through in a week. China's is still largely a culture of savings. Retail sales grew about 12% last year to $800 billion, but studies show that households generally sock away a quarter of their total income, and spend almost the same proportion on food. It may be hard to believe after a day shopping in Shenzhen, but despite having the world's largest population, China accounts for less than 5% of global consumption.

Saving for a rainy day may sound smart, but some observers say this habit could be hindering China in the long run, and disrupting global trade balances. Access to consumer debt could ease the country's dependence on exports and investments that now power China's 10% annual growth, ultimately making it more sustainable. "Mature economies are driven by consumer spending," says Nigel Lee, president of First Data's Asian operations. "Consumer credit is an important instrument in increasing domestic demand."

The Chinese government doesn't entirely disagree. At the urging of the U.S., the country has undertaken vast reforms of its banking sector over the past five years, including opening up the system to foreign banks offering debit cards. But officials remain cautious about letting consumer debt grow too fast, and have maintained safeguards such as low credit limits. Wang Huaqing, assistant chairman of the China Banking Regulatory Commission, recently told the Washington Post that such decisions come from reports of people taking out loans to speculate in the stock market or on real estate, adding the indebtedness of young Americans was also a cautionary tale. "We have been paying great attention to credit card risk and loan risk," Wang said.

Which is not to say things aren't changing. Bank ATM cards are now ubiquitous, with more than 1 billion in circulation in China. And, in 2006 the number of credit cards shot up 39%, and the total is expected to double again this year. Whereas banks barely break even now on such business, McKinsey estimates by 2013, China's consumer credit card profits could hit $1.6 billion. Indeed, at a Shenzhen Starbucks, I watched as a young woman paid for her caramel macchiato with a Beijing Olympics-branded Visa, one of what seemed to be several cards she had in her wallet. We were just down the block, but Luohu's bustling cash trade seemed a universe away.

• Kathleen Kingsbury