But Ferragamo, chairman of Florence-based Salvatore Ferragamo Italia, a luxury goods company founded by his father, Salvatore Ferragamo in 1928, is standing firm.

'Because we are 100 per cent made in Italy the market is worried about the high costs and all that,' Ferragamo said, noting that his competitors had relocated part of their production outside Italy, either officially or unofficially.

'But we have a very flexible structure that means we can compete very well. We have many factories that produce exclusively for Ferragamo. The agreement is a handshake, a look at them in the eyes, but no contract.'

Such an arrangement, he argued, was time-tested and a win-win formula because Ferragamo could walk out when the factories failed to perform, and the factories did not have to worry about losing contracts to others because the partnership would continue indefinitely. One factory has worked for Ferragamo for 58 straight years.

In addition, when the market fluctuated, quantities could be varied more flexibly in the absence of a contract, Ferragamo said, which helped both factories and the company.

'Their problem is our problem because they are our factories,' he said. 'If their mentality is very good and they are very much committed to us, we respect that and we try to improve them.

'We try to make them evolve. We are not looking to move production outside Italy where it might be a lot cheaper because they belong to a family.'

Ferragamo is not blind to the problems of his country: the government was too slow and not practical enough, and the business community faced high costs and little flexibility.

He also said finance had increasingly become an issue for many companies because bankers were very strict about making loans to avoid risks. In the manufacturing sector, liquidity has become difficult because not many firms paid on time.

More Italian businesses might have moved to Asia to control output costs and raise funds through a stock market listing, Ferragamo said.

China, meanwhile, has expressed increasing interest in acquiring Italian brands and industrial know-how since the unfolding of the euro-zone debt crisis. In January, machinery maker Shandong Heavy Industry Group-Weichai Group of Jinan reached a deal with the debtors of Italian luxury yacht group Ferretti to acquire 75 per cent of its share at Euro374 million (HK$4.1 million), more than half of which would finance debt.

Small and medium enterprises are also seeking deals in Italy. Sitoy, a Hong Kong-listed luxury leather goods manufacturer for Prada and Coach, acquired Italian brand Tuscany in February last year. It said the economic conditions opened more potential acquisition targets in Italy.

Ferragamo said his company's listing on the Milan stock exchange last year was more for management reasons - the family has 25 grandchildren of the founder competing for three places in the firm.

Ferragamo's shares have advanced 30 per cent since it went public in Milan in June. The stock closed at Euro12.53 on Friday.

Ferragamo said it chose not to list in Hong Kong even though mainland China remained an important market for the brand. It planned to enter as many as eight new mainland cities over the next three to five years. 'We are 100 per cent made in Italy. It will be funny not to have the listing certificate in Milan but somewhere else,' he said. 'If I could go back I would have done exactly the same thing.'

44%

growth in revenue from the mainland China market for the 2011 financial year

- Euro986.5m in consolidated revenue