Tie manufacturers in Shengzhou, Zhejiang province, are investing more in design and raising brand awareness internationally. More than 467 companies have registered trademarks in the city.

In his trendy-looking research studio at Babei, the world's No 1 producer of silk neckties based in Shengzhou, Tu Yongjian is building a wall library of color-coded books stuffed with fabric cuts to combat the financial pinch facing the industry.

Shengzhou, a city of about 650,000 people in East China's Zhejiang province, produces about 60 percent of the world's neckties and 90 percent of those destined for the domestic market.

In 2009 it produced some 300 million ties worth 10 billion yuan (1.17 billion euros), but local captains of industry are planning to double this revenue stream in 2011 as the cluster spreads into other silk-friendly industries like bedding.

The situation in Shengzhou is not unique in China, where many cities seem like highly specialized versions of Santa's workshop, but its economic model is hailed as one of the most successful in a region that also serves as a global factory for socks (Zhuji) and shirts (Ningbo).

However, the 1,100 or so original equipment manufacturer firms that keep European businessmen looking flashy in ties picked by their spouses - half of the world's ties are bought as gifts by women - have seen their slender profit margins devoured in recent years by inflationary costs, surging wages and spiraling raw material costs, and now they are biting back.

As vice-president of the company that ranks as top dog in Shengzhou, Tu is busy building an online database of tie designs to keep him and his local competitors in the black. His rainbow-colored brainchild aims to slash research costs for new designs by up to 50 percent as global demand shrinks yearly in tandem with ties' waning popularity.

"This is going to be the largest database of tie patterns in the world," says Tu, whose company makes 30 million ties a year, 90 percent of which are exported overseas. Customers range from budget Irish label Primark to Italy's Armani and America's Phillips Van-Heusen, which owns Tommy Hilfiger and Calvin Klein.

Most are destined for Europe, the United States, South Korea and Japan, where businessmen still favor them. But companies here are now chasing other revenue-making opportunities as the market, after a golden period from 1990-2000, began to run out of steam.

China's necktie industry got off to a bumpy start 25 years ago in the experimental economic zone in Shenzhen, which was established by late leader Deng Xiaoping across the border from Hong Kong. As other industries in the city outraced it, the dozen or so tie makers were relocated to Shengzhou where they soon capitalized on their collective strengths.

Now they are facing another transitional stage as China shifts over to the next pattern of production, away from copying and on to delivering original content, Tu says.

The next phase, according to local government officials, is buying up foreign brands and creating local companies' own trademarks in the domestic and international market.

"In the past, companies came to us with their designs and we copied them. Now we provide 50 percent of the designs ourselves. This is the new trend in the industry. More patterns basically mean more profit," Tu says.

This compares favorably to other companies in the cluster, which provide one-third of their own designs, according to industry statistics.

"The pressure to chase the pattern now is quite high, because the tie industry is not like the textile industry. Tie patterns have a limited shelf life of three to six months," Tu says.