Mary Hennock BBC News Online business reporter in Shenzhen

When Luca Ricci sold his first batch of leather sofas in 1998 he told the North American distributor they were made in Italy.

DeCoro wants upmarket looks at mid-market prices

"I was scared because I didn't know if a sofa made in China was saleable," he admits, laughing at the memory.

Three months later, he felt confident enough to own up and told his startled buyer, "It's made in China - I lied."

Sales at DeCoro, the firm he set up and runs, have rocketed from $10m in its first year to $220m (£131m) in 2002.

In June, DeCoro opened what it says is the largest sofa factory in the world. It is 2 million square feet and can fill 55 containers a day. DeCoro aims to sell $250m in sofas this year.

Sleek image

DeCoro is now roughly one third the size of Natuzzi, the biggest Italian leather sofa maker, which had sales of $761m in 2002, but the upstart is growing fast.

Luca: 'I'm proud to give jobs to 2,600 Chinese"

Its success hinges on juggling a double identity - both Italian, like its founder, and Chinese.

"Retailers all over the world, they advertise the product as an Italian leather sofa, not as a Chinese sofa," says Mr Ricci.

Among consumers, Made-in-China spells tacky not trendy. Its reputation as a producer merely of plastic toys and cheap clothing may be out of date but seems unbudgeable.

If it were not for China's image problem, DeCoro's Chinese credentials would seem to be impeccable.

Trashy or trendsetting?

Its HQ is in Shenzhen, a boom town across the border from Hong Kong. All manufacturing takes place there and about 90% of its 2,800 staff work there.

Milanese chic starts here

But Italian style is famous worldwide; interior designers flock to the Milan furniture fair with the same fervour as fashionistas watch the city's catwalks.

In what sense is DeCoro Italian? Mostly in the branding, it seems.

And that's fair enough. DeCoro imports nearly all its leather from Italian tanneries, the rest is top-quality Swedish.

Two of its three Italian designers live in Italy, faxing over their sketches for a catalogue of 200 sofas.

"The retailers get the best of both worlds," says Chris Boiling, editor of Tableware International America and Furnishing.

Hand-made chic

What China offers DeCoro is lots of cheap manual labour.

Cutting leather is the trickiest job

Mr Ricci reckons his sofas would cost up to 40% more if hand-made in Italy. DeCoro credits itself with revolutionising the market by providing affordable luxury.

Sales director Giovanni Prati is lyrical about the need to make sofas by hand.

"The moment you realise a sofa is made by machine, it becomes something inanimate. It must have a personality, a feeling to transmit," he says.

Walking through the giant sheds, it becomes clear that only two jobs are mechanised.

Each shed contains hundreds of workers in different coloured T-shirts - white for cutting, blue for stitching, olive for woodwork, red for quality-checking.

Cutting and sewing leather are the most sensitive operations, giving "90% of the quality", says Mr Prati. Skilled workers know how to make tiny adjustments that machines cannot.

American dream

Workers do everything except carve the foam blocks - known as panne, or breads - which is done by a computerised blade. Stuffing is fluffed up in a giant spin dryer.

Almost everything is done by hand

DeCoro says it pays 2,000 yuan ($241; £144) to 2,500 yuan a month, double the average factory hand's wage. Like most factories around here, it provides dormitories and food.

US stores take 72% of DeCoro's sofas. The UK is its number two market, with 20%. France, Belgium, Scandinavia, even South Africa figure, but not Italy.

Mr Ricci says Italy is on his agenda, but his dream was to conquer the US, the biggest market.

Shenzhen's giant ports and 24-hour customs clearance make it an ideal base for his assault on the high volume US market.

Sofa culture

Markets require different styles. In North America, Mr Prati says "people like to really splash down on the sofa". Houses are bigger, and extending leg rests popular.

Shenzhen's Yantian port is less than an hour away

In Europe, "you need more design, cleaner lines". He points to a chestnut two-seater popular in France.

Black leather is always top choice, but right now a scuffed brown leather look called sauvage is riding high.

The West's increasingly service-driven economies rely on the ability to sell knowledge abroad - design, marketing, project management.

DeCoro's structure reflects this global division of labour. But how solid is the West's advantage, and how long can it last? Such skills can be hard to quantify and seem mysterious, but they can be learned.

"It's premature to talk about Chinese design," says Mr Ricci, a verdict few would dispute. China has pushed for economic growth, not style.

Designer genes?

So how important is the word Italian to DeCoro's success? "It's absolutely very, very important," he says.

Leather is a big part of DeCoro's costs

He believes it may be possible to produce good top quality leather in China. But in the leather sofa business, "a pure Chinese company...it cannot happen," he says.

"Italian people are creative people. I think design, fashion, is a matter of taste. It is something you have in your culture."

Mr Ricci learned furniture-making during eight years in his father's firm, but wanted to branch out on his own.

He readily admits that only a developing country like China could let him realise his dream.

A trial visit to Mexico failed to impress him, but China struck him right away as a good place to work hard and get things done.

"I work seven days a week, I've become Chinese," he jokes. That DeCoro has grown so fast in six years stuns him.

"Honestly, I'm proud to give jobs to 2,600 Chinese. When I came here you saw bicycles. Today all my workers have mobile phones and motor cycles."