The Chinese have a well known saying about the country's Southern regions. The swath of land along their Southeastern coast is colloqially known as where "the mountains are high, and the emperor is far away." Or in other words where the government is not paying attention.

There is no where is this more true than the city of Wenzhou. The citizens of Wenzhou, a medium sized city about three hours South of Shanghai, have become legendary in China over the past 30 years, due to the large number of successful businessmen the city produced.The city is the largest producer of textiles in China, as well as a major producer of plastic goods, auto parts, and building materials.

The city is also a libertarian's paradise. Private citizens built most of the infrastructure in the city, and created a thriving unofficial banking system that allowed entrepreneurs easy access to capital without the support of the state run banking system. Gambling and prostition, both illegal but common in China, are openly advertised. And the Chinese government stays clear away because the city works: migrants from all over China flock to Wenzhou because the city's wages are the highest anywhere in China.

It's important to understand the city of Wenzhou if you want to understand what's going on with the Chinese factories Italy. Seventy of these factories, in Florence, Pisa and Prato, were recently raided with accusations of hiring undocumented workers, tax fraud and illegal money transfers. The Wenzhounese are by far the largest segment of the Chinese diaspora in Italy, and it's almost a certainty that most, if not all, of the owners of these factories were from the city or at least nearby.

While all of the crimes which have been mentioned are illegal, the core issue at the root of all accusations is that these 70 factories have ignored the government - or in other words that they have transplanted their ultra-laissez-faire business culture from Wenzhou to central Italy. This echoes the regular complaints from Italian textile factories about their Chinese counterparts - that the latter ignore unions and trade organizations. That the Chinese businesses make an effort to maintain a distance from their adopted homeland.

There are some signs though that the local business cultures are fusing together. A few months ago I interviewed Vinicio Bacio, the coordinator of special projects, Tuscany, for Invitalia, the Italian investment promotion agency, who argued that the taxation issue is coming under control. “While there is still a large quantity of activities undeclared, most of the manufacturing and trade promoted by the Chinese community in the textile area is regularly reported,” he says.

He also argued that the relationship between Chinese companies and the revitalization of the native textile trade in the Tuscany region was strong. Italian companies are largely focused in yarn and fabrics, while Chinese focus on "fast fashion." The local Italian community both benefits from the ease of access to inputs produced in Wenzhou, and a market for their fabrics among the Chinese "fast fashion" companies.

And while Chinese companies are bringing in a large number of undocumented workers to meet the demands of their clients for labor at Chinese prices, the immigrants that stay are rapidly integrating into the society, giving them a larger amount of labor mobility, and wage demands that rise to meet the level of locals.

Chinese companies currently dominate the global market for clothing, with Chinese help Italians could take back the crown.