Pretty good article in the NY Times Chinese Remake the ‘Made in Italy’ Fashion Label, mostly about the situation in Prato. Some of the reporting seems a little too cute to be believable and the quotes too perfect - but who knows. The gist of it is that there is no plan - I don't think the situation is much different anywhere else in the world. The Italians let the Chinese in, took their money, and now that times are tough, the Italians are pissed. It's an old story unfortunately.
Here is a slideshow that goes along with the article.