Luxury fashion labels measure up to the competition

He said the move also strengthened consumers' faith and confidence when choosing between domestic and international brands.

The capital market also showed its approval of China's fashion industry, with some fashion manufacturers' stocks rising for several days running in March.

Zhang Qinghui, deputy director of China National Garment Association, said high-end customers in first-tier cities such as Beijing and Shanghai have a growing demand for the personal touch, boosting the growth of the high-end clothing industry.

The massive domestic market has presented many traditional export-oriented manufacturers with opportunities during the global economic slowdown.

Hu Dongmei, secretary of the board of Dalian Dayang Trands Co Ltd, a leading garment manufacturer and exporter in China, said the domestic high-end suit market is massive for her company, and is considered a major growth engine.

Though the consumption habits and culture in terms of suits are not as mature as in Western markets, local consumers' desire to boost their personal image has explained the potential to grow quickly, she said.

The high-end bespoke clothing sector has increased rapidly, with its revenue doubling every year, said Hu.

One of Trands' advantages in high-end bespoke clothing is its manufacturing capacity. "Unlike companies that only have designs but no factories, we can proceed very quickly from designing to manufacturing."

Hu said the market share of domestic brands and high-end bespoke clothing has increased in recent years, with the ratio between its domestic and export business is set to reach 50:50 in the near future.

In 2012, Trands' revenue reached 856.1 million yuan, down 11.17 percent year-on-year. Its net profit decreased 28 percent to 105.21 million yuan. In China, the company added eight stores last year, with improvement in single store operational revenue.

The decline in its business was due to international market woes, price competition from Southeast Asia and domestic suit market integration. Its export orders and the domestic suit market have also seen declines, according to the company.

The main challenge for Dalian Dayang to extend its manufacturing based business to branding and marketing operations is to raise the quality of its products and know what local customers want, according to Hu.

The company has set up three designer teams for each of its three brands, with its high-end brand Trands inviting leading designers from Italy.

"The designs have to be ahead of the trends," Hu said.

However, it will take a long time for local fashion brands to build up their high-end identity among Chinese consumers, some business insiders say.

"How to change Chinese high-end consumers' preference for foreign brands is a challenge for local brands," said Shen Dongri, chairman of Lancy Company Limited, the only women's clothing manufacturer listed in the A-share market.

Design is also an issue, with many companies finding that their growth is hampered by shortcomings in this respect.

Many Chinese fashion brands developed from being manufactuerers producing goods for other people, but their Archilles' heel has always been their design capability.

"Chinese fashion brands know manufacturing," said Shen. " But their design capabilities are still too limited, although we try to integrate Chinese culture into the design."

Chinese brands cannot express Chinese culture correctly now, he added.

Wang Yutao, who owns a fashion design studio, which has provided couture designs since 2007, said high-quality clothing is a mixture of expensive fabric, delicate handcraft and the ability to meet customers' requests.