Next time you pick up a garment with a "made in Italy" label, remember the pictures on these pages. Because these days, the phrase may be rather misleading.

Today, more and more of the people producing "made in Italy" goods are actually Chinese. They live and work in Italy's famous fashion regions, but much of the fabric is imported from China, and the companies producing, packing, transporting and marketing the clothes are Chinese-owned. The workers, in makeshift factories, are often illegal immigrants.

Thanks to the book and film Gomorrah, the world has learnt of the situation outside Naples, where Chinese businesses in cahoots with the Camorra, the Neapolitan mafia, turn out millions of counterfeit clothes and accessories every year. But further north, it's something else. The Chinese have stormed the citadel of Italian moda, the handsome city of Prato, near Florence, which for generations has been a bastion of Italian design.

Today, quick fortunes are being made here by businessmen exploiting the "Italy" cachet and producing humdrum, mass-market clothes, shoes and accessories at rock-bottom prices. In the process, their critics claim that they are undermining a national brand that has been carefully nurtured since the Renaissance.

And that's not the only issue. Here in the heart of Tuscany, celebrated for its splendid countryside and climate, but also for its strong protection of workers' rights, thousands of Chinese are crammed into workshops, sometimes working for long stretches in the oppressive summer heat.

The Chinese began arriving in Prato in the early 1980s, and today there are more than 11,000 living legally in the city. But according to the mayor's office, more than twice that number live in the city illegally; Prato has the largest concentration of Chinese anywhere in Europe.

Other, specifically Italian factors, have made it easier for the Chinese to make themselves at home here. The local bureaucracy is heavy in its demands but slow-footed, and Chinese businessmen have used smart local lawyers to confound it. The court system is also notoriously sclerotic: Chinese businessmen who swerve and dodge to stay out of trouble find themselves in excellent company here – take the Italian prime minister, for example.

But for Silvia Pieraccini, author of a book titled The Chinese Siege, about Prato's woes, the real peril lies elsewhere. "The great danger is that the illegality will spread," she says, "and that the huge profits being made will infiltrate other fields."