Typically when people think of the dominance of China manufacturing in the world, we think of the "Made in China" label. But it may not really be so black and white anymore. Italy, which has long been known to be the global capital of fashion, has been finding that though it has been able to maintain the "Made in Italy" label, it could be the Chinese that are the ones providing the growth, as they bring their industrious nature and aptitude for dealing with restrictive regulation to Italy's own fabric capital.

Mannequins- image by digitalart

What is really behind the "Made in Italy" label?

Starting from one of the pioneers of modern fashion, Elsa Schiaparelli, to the modern czar of extravagant opulence, Roberto Cavalli, Italian fashion has had it all. Italian men and women have had some of the best fashion visionaries watching over what they wear; be it clothes, perfume, shoes, jewelry or hair, for almost all of the last century. One of the most famous medieval cities and textile hubs, which for centuries has produced some of the world’s finest fabrics, becoming a powerhouse for “Made in Italy” chic, is Prato. However, this city, just in the heart of Tuscany, is now also home to the largest concentration of Chinese in Europe.

A New, Globalized Market

China is expanding its reach in the world — through investments, infrastructure, military influence. Today if you walk past the city of Prato's medieval walls, past the cathedral with Filippo Lippi’s Renaissance frescoes, you will find Via Pistoiese, the heart of the city's Chinatown. Here the street signs are bilingual, the stores sell imported Chinese goods and you find all types of Chinese shops, hairdressers and hardware stores. Authorities say there are 11,500 legal Chinese immigrants, out of Prato’s total population of 187,000. They estimate the city has an additional 25,000 illegal immigrants, a majority of them Chinese. Police raids are frequent, and in June police uncovered a string of sweatshops, in the heart of the “fast fashion” sector- an industrial area on the outskirts of town, Macrolotto, filled with Chinese fashion wholesalers. Here Chinese workers are paid miserable wages, they sit before sewing machines around the clock in about 3,200 businesses, producing a total of 1 million garments a day, clearly not taking part in the the well known Italian custom of the afternoon siesta. They vary from low-end clothing to shoes and accessories. According to a recent article in the New York Times, "Chinese Remake the 'Made in Italy' Fashion Label", the Bank of Italy estimated that Chinese individuals in Prato channel about US $1.5 million a day to China through earnings from the garment and textile trade. According to the Prato Chamber of Commerce, the number of Italian-owned textile businesses registered in Prato has dropped in half since 2001 to just below 3,000, 200 fewer than those now owned by Chinese, almost all in the garment sector. Once a major fabric producer and exporter, according to the New York Times Prato now accounts for 27% of Italy’s fabric imports bought direct from China.

Is Italy Losing at its Own Game?

Once thriving and inventive tax evaders, brilliant at navigating Italy’s notoriously complex bureaucracy, the Italians in Prato now seem to be going under. Chinese businessmen meanwhile, have proven to be adept at bending the rules and quicker to adapt by using a new and now common technique, ironically with the aid of knowledgeable Italian tax consultants and lawyers: they open a business, close it before the tax police can catch up, then reopen the same workspace with a new tax code number. The Italians of course feel threatened by this phenomena saying it could suffocate Italian culture and take over more of their cities as the Chinese continue to expand.

Interpreting the rules is a daily habit in Italy, but lately resentment has been building up. While some complain the Chinese have taken over their jobs and businesses, Chinese argue that, if anything, they've brought new jobs to Prato. They believe they have saved Prato from economic irrelevance and that if the Italians fail to take full advantage of their resources, then it is a “Made in Italy” problem and not a Chinese immigrant problem- it is the Italian state that fails to innovate and modernize the economy, and as they stand idly by, it is someone else that has simply out competed them.

All this has been enabled by Italy’s weak institutions and high tolerance for rule-bending. The Chinese are using this to their advantage by blurring the line between “Made in China” and “Made in Italy.” This has quickly started to undermine Italy’s cachet and ability to market its goods exclusively as high end fashion.

What's the Cause?

Prato’s parking lots are full of large vans coming from across Europe ready to be stocked up with “Made in Italy” labeled clothing to be sold back home at a huge markup. Many manage to avoid paying import tariffs by buying small quantities and taking advantage of the fluid EU borders.

Italian Fashion - image by Vlado

Italian Fashion is the envy of the world, but how will Chinese involvement in local labels affect the global image.

Fashion, of course, is largely about image, and even when buying low-end garb, many people are likely to gravitate toward clothes made in Italy, as images of Milan runways dance in their heads. However, little do many people know that much of these clothes are actually made by low-paid often undocumented Chinese workers laboring in an Italian shadow economy of factories. Increasingly many of these factories with well-known brand names are actually Chinese owned as with, for example, the recent acquisition of the well known Italian fashion brand Cerruti by Chinese luxury clothing retailer Trinity Ltd.

But as with in another nations "afflicted" by influxes of immigrants, people who blame immigrants for financial distress often ignore the fact that the newcomers are usually creating a new economic stimulus and hence jobs and opportunities for everyone, reinvigorating communities who's populations had been in decline or local economies that were previously stagnating. It could almost be described as an inverted form of outsourcing– instead of sourcing from China as the primary way to purchase garments, as a bulk of apparel-makers have done over the past 30 years, Chinese workers are flooding Italian cities to make the clothes there. It seems as if the Italians have been taken off guard by the speed and efficiency with which the Chinese have been able to work in this traditionally Italian-centric industry. The resulting resentment has caused this potential boon for local economies to be viewed through a lens of xenophobia, as the Chinese continue penetrating the supplier industry and taking over the Italian contracts and factories.

The biggest competitive advantage that the Chinese have is that they can produce locally but at Chinese prices while remaining extremely flexible. Instead of waiting weeks for containers and paying import duties, customers can buy merchandise from local Chinese-owned firms, merchandise that in many cases can be produced in a single night. Best of all, the labels can rightly say "Made in Italy" though they may be "Made by Chinese". One local was quoted in an online article entitled "The New Wave of Globalization" in the Spiegel International saying that “they have completely reshaped the city’s industrial zone with this invention, Prato used to be a textile city. Today it’s a low-cost fashion district.”

The Chinese invention is called Pronto Moda. It is inexpensive, off-the-rack fashion with which the Chinese flood the market. Its approach is straightforward. The new bosses sit in their offices, behind closed blinds, imitating but not exactly copying the latest trends. They hire Italian fashion illustrators who, although they're more expensive than their Chinese counterparts, have the necessary taste and experience with fashion to create a look that matches the tastes of the time. The illustrators flip though sample books and "Collezioni," and scan the designers' websites. Their bosses point out photos that interest them, tell the illustrators what they want tweaked or modified and that they have half a day to produce new illustrations, which are then dispatched to low-wage workers who sew together the new "creations" in the factories.

Eighty percent of customers are wholesalers from neighboring European countries. They come to Italy's Chinese producers to buy flowered T-shirts, viscose blouses and sequined jeans, pay cash, load the merchandise into their Mercedes sports cars and drive home to Germany, Poland or France. The merchandise, which has a relatively short shelf-life, ends up in discount department stores, on bargain tables and in street markets. In the end of the day though it comes down to a question: What does it mean to be "Made in Italy" today? Furthermore, as we examine this dilemma, which is turning out not to be unique only to Italy, one must ask whether this cultural shift, with Chinese immigrants at its heart, has revived a dying brand or rather fundamentally changed it for the worse?

  • Melanie Hirsch- CPG Marketing Intern