By Victoria Gomelsky

China is the talk of the luxury trade, and for good reason. What branded goods marketer wouldn’t salivate over the prospect of millions of upwardly mobile consumers anxious to qualify their status as nouveau riche? With the U.S. economy in jeopardy, the Far East’s untapped riches seem all the more enticing, so sure are we that they hold the secret to the jewelry industry’s continued prosperity over the next decade and beyond.

But true as the hype might be, it obscures some of the less savory aspects of luxury retailing in China—namely, the flipside trade in counterfeit goods, scores of which are sold on the same city streets that house shops selling the real things. Nowhere is this tension more evident than at Shanghai’s infamous Xiangyang copy market. Once located in the touristy Puxi district, the market was closed in 2005 and moved underground, literally, to a basement venue beneath the Science & Technology Museum in the newfangled district of Pudong. During my January tour of the city’s up-and-coming luxury scene, recounted in this issue’s special report, a visit to Xiangyang promised to offer an intriguing counterpoint.

As soon as my taxi pulled up to the desolate steps of the museum, a young Chinese man sporting spiky hair, jeans and a black Members Only-style jacket approached me: “You want shopping?” The shop he led me to contained a room hidden behind a door that resembled a shelf. If I were a handbag junkie, I’d have gone weak in the knees; copies of Louis Vuitton’s Murakami bag as well as popular styles from Coach, Gucci, Dooney & Bourke and Hermès towered overhead.

When I said I was interested in watches, another Chinese man, older with thick black hair falling over his eyes, hauled in four steel suitcases, each lined with stacks of timepieces, like tiered boxes of chocolates. I examined the Breitling chronographs, Patek Philippe “conplications,” Chanel ceramics and, of course, the ubiquitous stock of “Faulexes.” The vendor even goaded me with an automatic Vacheron Constantin with a start price of 880 RMB (about $123), which he shook to prove that the mechanical movement was working (the tortured sound of metal grinding away was my first clue).

As I scrutinized the watches for signs of fakery (misspellings are the dead-giveaways but so, too, are the lightweight way these admittedly high-quality fakes feel), the woman who’d been imploring me to buy a Gucci wallet noticed my ring, a Tahitian pearl mounted in an etched 18-karat gold design that resembles the petals of a flower with pavé diamonds on the fringe (by BaselWorld exhibitor Gumuchian). “So nice, very nice,” she said with open admiration. “Very original.”

And here I couldn’t help but smile. Even in the beating heart of China’s counterfeit goods trade, where vendors sell facsimiles of brand-name watches and handbags with boasts about how closely they resemble the real thing, there is a palpable desire for unique design.

What this suggests is that as women not much different than the vendor grow into their purchasing power, China will, indeed, reign as the luxury market of the future. In the meantime, apologies to Gumuchian if the next item to appear in a down-market Shanghai shop looks suspiciously like my ring.