The Gucci Killers

It's 10 till 10:00 on a dark night in a 1,300-year-old Confucian temple in Shanghai, and if the weather is any indication, Confucius is ticked. October is traditionally a dry month in this part of eastern China. Indeed, yesterday was sunny, and tomorrow is predicted to be glorious. But a steady rain has been falling since late afternoon and shows no signs of letting up. Journalists from three continents, local bigwigs, style-obsessed Chuppies, and even three athletes from China's 2002 World Cup soccer team--certified national heroes--are huddled under umbrellas in the wings, drinking champagne, waiting for a fashion show to begin.

A red lacquered catwalk, slick with puddles, rises three feet above the temple's paving stones and runs the length of the open courtyard. It's a personal-injury lawsuit waiting to happen. But Raphael le Masne de Chermont, CEO of the Chinese luxury lifestyle brand Shanghai Tang, seems unconcerned. Despite the fact that he's about to watch a $49,000 hand-embroidered, chinchilla-lined silk coat that took four months to make (and has already been sold to a Chinese mogul's wife) come sloshing through the rain, he's as charming and chipper as if this were a cozy tent in Bryant Park. If courage is grace under pressure, le Masne de Chermont deserves a fashion-industry medal of honor.

The lights go up, the throbbing beat of "Tainted Love" fills the temple, and a parade of gazellelike Chinese models begins mincing through the mist on high-heeled wedgies. On display is an array of sumptuous clothing: Brocaded parkas with fur-trimmed hoods, silk jackets topstitched in cloud patterns, tweed skirts festooned with crystals in a dragon-scale design, and cardigans embellished with jade are among the 46 outfits to skitter through the rain.

When the final outfit, a full-length shearling coat encrusted with Swarovski crystals, makes it safely back to home plate, the crowd bursts into relieved applause. "Confucius is a very tolerant man," sighs le Masne de Chermont, before leaping to the stage with his creative director, Joanne Ooi, for a triumphal lap.

The glitzy event was a high-stakes gamble for the brand, which has had a rocky history since its launch 11 years ago, including an embarrassing flame-out in New York in 1999. But now the new team, led by le Masne de Chermont and Ooi, believes that Shanghai Tang's moment on the world runway has arrived. If, as global market watchers from Wall Street to Tokyo have claimed, this is the China Century, then Shanghai Tang may just turn out to be that century's banner--China's first global, upscale brand.

China is on the verge of fielding high-end fashion that can compete with anything coming out of Paris, New York, or Milan.

For this exuberant and increasingly entrepreneurial nation, it would be a natural evolution--and a stunning one. As China enters the modern economic market, it has gone from being the low-cost factory for Wal-Mart to the purchaser of big-name brands (think Lenovo's recent acquisition of ThinkPad from IBM). The third stage will be for China to create brands of its own, becoming a center of design and innovation capable of fielding products that can compete in quality, style, and prestige with anything from Paris, Milan, or New York. "The opportunity for Shanghai Tang right now is huge," says David Melancon, North American president of brand strategy firm FutureBrand. "They could be the first big luxury brand out of Asia."

Out of Asia, yes--and in it, too. While the global luxury market is already big--$168 billion a year, according to Bain & Co.--and growing at a rate of 7% per year, "big" doesn't begin to describe the potential market for glitzy goods in China itself. A quarter of a century ago, there were no millionaires in China; by the end of 2004, there were more than 236,000, Bain says. And Patrizio Bertelli, the CEO of another fashion house that's hungrily eying the market--Prada Group--figures that China could overtake the United States as a market for luxury goods by 2020.

In the meantime, the profits China's homegrown brands earn at home will help finance their forays into the rest of the world. Add in the cheap labor close at hand (an edge over many Western luxury labels, which are made in Europe), and the Guccis and Armanis could be facing competition like they've never seen before.