Q&A with Bernard Arnault

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Bernard Arnault in Beijing

It's a myth, of course, that the Great Wall of China is visible from space. Although LVMH chairman and CEO Bernard Arnault was unable to reverse that on a trip to the ancient world's most ambitious building project last Friday night, LVMH did succeed in floodlighting a fashion runway atop the wall, lighting up the stairway to the beacon towers at Juyongguan Pass, as well as the surrounding mountain tops and, to the surprise of some Chinese guests in an audience which included movie star Ziyi Zhang and the granddaughter of reformist leader, Deng Xiaoping, branding the hillsides with projections of Fendi's double F logo. Before the first ever fashion show to be held on the structure, Arnault and his wife, Hélène stopped to snap their own photos of the views and TIME's Marion Hume talked to the world's seventh richest man about luxury in China.

TIME: You're a busy man, why have you personally come to China?

Arnault: Because China is clearly going to be the number one economic power and it is already full of potential — with lots of population and the buying power increasing by the day. [For LVMH] this is a pioneering country, where we have grown relatively fast with luxury goods and cosmetics, and we are opening new territories for wine and spirits.

Have you been here before?

Maybe twenty times. Each time, I try to discover a new city which I don't know and there are so many with potential, like Hangzhou where you have the lake, but also a very dynamic city and where we have several shops. Or for one that is culturally very interesting, there is Xi'an and the terra-cotta soldiers.

Does this feel like a Communist country to you?

Yes, but with private enterprise in the mind. There was a poll in which the Chinese [came out as] far more in favor of free trade than the French. So here they are, in a socialist type of organization, but they are more business-oriented than several countries in Europe today. And you feel it.

You gave Louis Vuitton a real push here ten years ago with a car rally from Dalian to Beijing. Tonight, the brand you are promoting is Fendi. Can Fendi grow really big in China too?

Yes. Fendi is a symbol of Italian craftsmanship, Roman construction and it is full of history. Fendi was once the number one Italian brand and I think one day it could be back to that position and it could be very successful here. And we are very lucky to have Karl [Lagerfeld] as our designer, and we were lucky to have kept him.

Why do the Chinese want luxury goods?

Because they are different than what is available here in China. The luxury they want is high quality, done in Europe and a symbol of the European craftsmanship and history.

But if luxury products like Fendi are really handmade as your people say they are, then how can you possibly produce enough of them for this insatiable market?

The key to the success is to keep this artisanal production but to organize it so well that you can increase the capacity. [The Fendi factory in Rome] has almost no machines. It is all handmade but it can be increased with the same level of craftsmanship, which is good for employment. This is also what I say to politicians in France, where we have some factories doing other brands [including Louis Vuitton]. Many of them are against globalization, but what we do in our group is the opposite of the bad effects of globalization. We produce in Italy and in France and we sell to China, when usually it's the opposite.

They sell a lot of knock-offs here too, though. Is the Chinese government really doing what they say they are to clamp down on that?

Obviously many things that can be done against counterfeiting are not done. When we talk to the Chinese government through our trade organization, they show the will to do it, and they have done some things, but it is a huge problem. But the fact is, it is also a European problem. I think we have been very successful fighting this in France, but less so in Italy where it is tolerated by the Italian government. First, we should be cleaning it up in Europe, close to the center of where the brands are. If we are not able to do it in Italy, what can we say to the Chinese?

You could say that they acted pretty swiftly when knock-offs of Beijing Olympics 2008 merchandise appeared and then disappeared from the streets. The problem is here, [the counterfeit business]is a big industry and it is criminal organizations that are doing this, in factories where they make children work. It's done by the same people who are selling drugs all over the world, and it has to be fought all over the world. The products you see in Italy are sold by these guys who are paid by the Italian mafia.

Some Chinese women I've talked to say that fakes help, that when they knew nothing about Western brands, they got to know about the labels through buying fakes.

No, I cannot say it has helped us and I cannot say that we would ever tolerate crime.

They say you can judge the style a man aspires to by looking at his wallet. What wallet are you carrying tonight?

Christian Dior.