Textile hanging featuring Shanghai landmarks by Jellymon

There's a feeling that Shanghai has returned to its roaring glory days of the 30s, which means huge energy, huge opportunity...and huge inequality

The first speaker session at the Creative Social Shanghai event this morning was by New York-based writer Stella Dong who recently published Shanghai: the Rise and Fall of a Decadent City. Stella gave a great potted history of a city that, as recently as the 1840s was just a quiet market town. "Shanghai is a city that no longer exists but in many ways has come full circle," she said. "Old Shanghai was a freewheeling place, it was about being greedy for material things and for life which is what Shanghai is once again after a long hiatus." Modern advertising came to Shanghai thanks to those lovely people at British American Tobacco who, in the early 20th century, came up with the idea to give away calendars featuring pretty Chinese girls [who also appeared on posters, which other brands copied, see below]. The images became iconic and unique to Shanghai." (Lots of examples of cigarette and other advertising here)

Although still very much seen as the commercial powerhouse of China, Dong wondered whether its pre-eminence as THE place to go to seek fame and fortune will endure in the face of increased competition from other, burgeoning urban centres. "Shanghai was known as the head of the dragon - everywhere else in China follows it. But everywhere else is westernising so rapidly that Shanghai may not remain as THE modern Chinese city, but instead become one of many," she said.

There was much talk of the uncertainties of the new China - inequality is rising so fast that it may soon approach 1930s levels in the city, China is beginning to feel the effects of the downturn with many designers telling us that budgets are being cut at an alarming rate. Unemployment may follow. The huge gap between haves and have-nots may well be the first big challenge for the new system that has ridden such an extended boom until now.

Nevertheless, from what we've been hearing these past two days, the creative scene is, as expected, hugely dynamic here (although, apparently, street art was suppressed during the Olympics in a bid to keep cities clean). The ground floor of the building that our conference is being held in is going to be devoted to Factory - a restaurant, bar, recording studio, pop-up retail store and design centre which will aid up-and-coming Shanghai talent. It's going to be run by American Sean Dinsmore and backed by ad agency Profero who have leased the entire building.

During the rest of the day, Dinsmore introduced us to some of the design talent that may be making use of the space. First up, fashion designer Dodo who talked about the growth in nostalgia for state-owned Chinese brands of the 70s and 80s, particularly sports brands such as Chrysanthemum tracksuits and Hui Li trainers (shown below). The latter were celebrated in Shumeng Ye's Book of Warriors which was packaged with a pair of the trainers and sold in über-trendy Parisian store Colette. The factories who make these lines are now too busy making for Western brands to be bothered with reviving Communist-era classics and, in general fail to recognise their appeal, Dodo said.

Another example was provided by the next speakers, design studio Jellymon. Lin Lin and her partner Sam Jacobs moved to Shanghai two and a half years ago. The pair had met while studying at Chelsea five years ago. One of their projects (in collaboration with Wieden + Kennedy) was for the Shanghai Watch Company which made the watch Mao wore. This state-owned factory is run down now and only makes for Western suppliers. Jellymon persuaded them to revive a 70s model which they decorated with work from local artists and designers and which now sell for the equivalent of £100 each.

Jellymon do a lot of work for sports and fashion brands including Nike (Chinese New Year packaging shown)

Adidas (window display, shown)

and local street wear brand Eno (plug-in store shown)

For the Social Jellymon asked young designers and illustrators James Chang, Rubber Pixy and graffiti artist Sice (pronounced 'Sick') to create hangings using Blue Nankeen – an ancient method of dying cloth using lime and soya bean flour. The results were a great clash of old and new - A Chinese design aesthetic without being kitsch.

With a studio of just six, Jellymon say they are constantly having to fight off ad agencies trying to nab their staff. As I found earlier in the year in India, ad agencies in China are using their financial muscle to pick up top design talent and employ them as art directors or use them to do branding work. This means that graphic design struggles for recognition and status and has to live very much in advertising's shadow. Nevertheless, Jellymon say the graphic design scene is growing in Shanghai, as shown in a current exhibition at the Source streetwear store and gallery.

More tomorrow....