LEE Xie, a Shanghai native now working with a New York fund manager, had a cup of coffee in his hometown during his Easter vacation which helped him to make up his mind to move back.

Or to be more precise, the location of the cafe where he had the coffee helped him make the decision.

It was on the roof of Three on the Bund, which has a breath-taking view of both the northern and southern ends of the historical Bund as well as the dazzling high-rises across the Huangpu in Pudong.

Three on the Bund, a luxury complex hosting world-class restaurants, a spa, gallery, boutiques, has impressed many people.

With names like Evian, Jean Georges, and "innovative brands new to China", it is like a magnet for Shanghai's style seekers and trend-setters.

But what has really brought this luxury complex into the world's spotlight is the opening of Giorgio Armani's flagship store last month.

The store, called Armani/Three on the Bund, sells clothes, flowers, chocolates and confectionery.

For the opening ceremony and Giorgio Armani brought in numerous celebrities as well as journalists, both from inside and outside China.

History may repeat itself. In autumn, another similar luxury complex - just a few minutes walk from Three on the Bund - called 18 on the Bund will be completed, which will be home to Cartier's flagship store.

Its neighbour, the historical Peace Hotel is said to be preparing to host Dior and Louis Vuitton flagship stores.

By then, a new high-end shopping centre will emerge in Shanghai's Bund area, featuring high-fashion and luxury concepts.

As the names suggest, all the buildings are located on Shanghai's historical Bund along the Huangpu River, known as an "exhibition of world architectural styles".

"What really attracted these world brands is the Bund's cultural and historical significance," said Mao Yuxin, a researcher with the Shanghai Sincere Real Estate Research Centre.

Actually, in the past decade, luxury major brands such as Dior, Louis Vuitton, Gucci and Ermenegildo Zegna have all extended their reach into Shanghai.

"But there is a shortage of eminent flagship stores", Mao added.

Nanjing Xilu, on the other end of Nanjing Lu from the Bund, has already established itself as Shanghai's most luxurious shopping destination.

"But when the Bund area was revitalized, nothing could compare with it," Mao said.

The Bund, on which stands a long row of stately colonial buildings, represents the city's glorious past of some 80 years ago. It has always been a symbol of Shanghai, especially to foreigners.

By contrast, the modern sky-scrapers on the other side of the river emerged over the past 13 years and tell the story of a new Shanghai, the booming financial centre of today's China.

"All these features endow the Bund with a unique personality and attraction, which meets the expectation of world brands," Mao said.

For such world-famous names, Shanghai, China's most chic city, is poised to become their next high-growth market, with its swelling affluent population and a foreign presence increasing by 20 per cent a year.

Although some reports say a number of big brands are losing money in China, or generating little profit, they still expect to see a big pay-off in the years to come.

In a report issued by Morgan Stanley earlier this year, China was identified as a very significant market for luxury companies.

"If 8 per cent of the population eventually ends up as luxury consumers, that's 100 million consumers," it estimated, stressing China's large population.

According to Qi Xiaozhai, vice-director of the Shanghai Commercial Information Centre, Shanghai residents' average annual disposable income reached 14,867 yuan (US$1,786) last year, which means a market eager for luxury consumption is taking shape.

Moreover, by the end of this year, China will allow foreign investment into wholesale and retail business, which stimulates international brands to come and tap the market.

But in the same report, Morgan Stanley also warned that it could take several years before luxury brands break even in China.

"Uncompetitive prices ... high import duties and taxation mean that expansion in China is a brand-building exercise," it said. "China will not be a big profit driver for at least five years."