Italy gets tough on illegal labour as Chinese flood garment industry

For centuries, the walled medieval city of Prato just outside Florence has produced some of the world's finest fabrics, becoming a powerhouse for "Made in Italy" chic.

Then China came to Tuscany. Chinese labourers, first a few immigrants, then tens of thousands, began settling in Prato in the late 1980s. They transformed the textile hub into a cheap garment manufacturing capital.

The city is now home to the largest concentration of Chinese in Europe - some legal, many more not. Chinese labourers work round the clock in about 3,200 businesses, making low-cost clothes, shoes and accessories, often with materials imported from China.

The Chinese have blurred the line between "Made in China" and "Made in Italy", undermining Italy's cachet and ability to market its goods as exclusive. Resentment is building, part of it cultural: the city's classic Italian feel is giving way to that of a Chinatown. But what seems to gall some Italians most is that the Chinese are beating them at their own game: tax evasion and navigating Italy's notorious bureaucracy.

According to the Bank of Italy, Chinese people in Prato channel the equivalent of almost 1 million a day to China - but profits of that magnitude are not showing up in tax records.

"Lots of businesses from Emilia Romagna, Puglia and the Veneto say, 'We don't want to wind up like Prato,'" said Silvia Pieraccini, author of The Chinese Siege, a book about the rise of the "pronto moda" or "fast fashion" economy.

Tensions have been high since the Italian authorities stepped up raids this spring on workshops using illegal labour, and grew even more when Italian prosecutors arrested 24 people and investigated 100 businesses in the Prato area in late June.

Yet many Chinese in Prato are offended at the idea that they have ruined the city. "If the Chinese hadn't gone to Prato, would there be pronto moda?" asked Matteo Wong, 30, who was born in China but raised in Prato and runs a consulting office for Chinese immigrants.

The number of Italian-owned textile businesses registered in Prato has halved since 2001 to just below 3,000, about 200 fewer than those now owned by Chinese, almost all in the garment sector. Once a major fabric exporter, Prato now accounts for 27 per cent of Italy's fabric imports from China.Domenico Savi, who was Prato's chief of police until June, said: "You take someone from Prato with two unemployed kids and when a Chinese person drives by in a Porsche Cayenne or a Mercedes bought with money earned from illegally exploiting immigrant workers… this climate is risky."

According to the Prato mayor's office, there are 11,500 legal Chinese immigrants out of a total population of 187,000. But it estimates the city has an additional 25,000 illegal immigrants, most of them Chinese.

Li Zhang, who emigrated to Italy in 1991, explained how his clothing company, Luma, produced on-demand fashion.

He showed fabric he said he bought locally or in India or China. He often buys white fabric and has it dyed and cut by other Chinese companies in Prato before giving the pieces to sub-contractors to produce garments in weeks, if not days.

People such as Mr Zhang are at the centre of Prato's "grey economy", whose firms are partly above board, in that they pay taxes, and partly underground, in that they rely on sub-contractors who often use illegal labour. Asked if his subcontractors did so, Mr Zhang laughed and said: "You'd have to ask them."