I have a Wulu around my neck. That’s the Mandarin word for gourd, and a famous good-luck symbol in Asian culture roughly equivalent to the horseshoe in the West. I definitely do feel lucky today, because this particular wulu is inlaid with tiny, brilliant diamonds and retails for about $50,000 at Qeelin (pronounced KEE-lin), the Asian jewelry company now owned by French luxury giant Kering (formerly PPR).
From my perch on a sofa in Qeelin’s sleek Hong Kong boutique, my luck continues. Co-founder and creative director Dennis Chan lets me model a diamond- and ruby-encrusted panda whose joints swivel and move (price: roughly $60,000), a lotus-flower ring that twists open to reveal an inner flower ($43,000), and many other pieces of jewelry with symbolic meanings in Asian culture. Named for a mythical Chinese creature, Qeelin has 19 stores in Asia and Europe, where — now with the help of Kering — it is trying to become one of the first successful luxury jewelry brands originating … in the East. Such celebrities as Katy Perry and Kate Winslet are already fans of the jewelry, which teeters on the edge between sophisticated and kitschy and ranges in price from $440 for a tiny pendant to $600,000 for custom-made pieces.
But why, one wonders, would Kering, the $13.4-billion-in-2012-sales company that owns Gucci, Saint Laurent, and Bottega Veneta — venerable European brands now increasingly dependent on the new Asian wealthy for their sales — buy a 10-year-old upstart, especially one bent on proving that great quality isn’t the sole provenance of European craftsmen? In part, Qeelin fits with Kering’s strategy of buying top brands in areas where it doesn’t already compete. But another major reason is that François-Henri Pinault, CEO and chairman of Kering, believes the new wealthy in China will increasingly support homegrown brands rather than always importing them. “[Qeelin] has all the components of a global luxury brand,” Pinault says. “It is very demanding in terms of craftsmanship and has strong design. And let’s not forget that China is one-fifth of the world population. So if a Chinese brand could succeed with the Chinese, then it’s very interesting to take that bet.”
Kering is not the first foreign company to take that bet. Its purchase of a majority stake in Qeelin is just the latest in a series of similarly well-intentioned but not-too-successful deals over the past decade, starting with Richemont’s 1998 purchase of Shanghai Tang, a Hong Kong-based retailer of Asian-inspired clothing. There are also Shang Xia, a Chinese brand co-created by Hermès, and a few others, but so far they’ve remained niche plays that haven’t really caught on in the mainland, let alone overseas. With just $40 million in estimated sales — Kering does not disclose the actual figure — Qeelin is small in terms of actual revenue, but it is emblematic of Kering’s desire to win in the race to develop a true Chinese luxury brand.
Co-founder Chan is ready for the challenge. A well-known industrial designer who created Taiwan’s national phone booth and started his own design firm, Longford, before turning to jewelry, he says what sets his brand apart is authenticity. “I think Qeelin is more genuine,” he says. “It is really created from an Eastern perspective, and at the same time we are offering something at the international level in terms of design, quality, and service.”
Although Chan himself is from Hong Kong, not mainland China, and his co-founder, Guillaume Brochard, is a French resident of Shanghai, the collections themselves play on deep roots in Chinese culture. Qeelin’s first collection, in 2004, was inspired by a trip to Dunhuang, a town in the middle of the Gobi desert whose centuries-old cave paintings showed Buddhas and others wearing traditional jewelry.
To a Westerner, Qeelin’s pieces are decorative and fun — almost childlike — but to an Asian, they have important and often auspicious meanings. Bells, for example, are a common gift to protect newborns against evil spirits, and the symbol of the longevity lock (Yu Yi), which means “your dreams come true” and stands for security, is a common theme. “Some fashion designers just pick a Chinese motif — for example, a dragon — and put it into fashion,” says Chan. “For Chinese people this is like a joke.”
But there are also modern shapes like robots that are not at all Chinese. “I wanted to let people know what contemporary Chinese design could be,” says Chan. “I don’t want people talking only about the Ming Dynasty.”
Today, of Qeelin’s 19 stores, nine are on the mainland, with the rest in Hong Kong, Europe, Tokyo, and Singapore. Six have opened since Kering bought in. In Europe there are boutiques in Selfridges and Colette, as well as standalone stores; the clientele there is about 15% Chinese, and the rest is European, Middle Eastern, and Russian. Hence the $64,000 — or is it the $640,000 — question: Could Qeelin eventually transition from a China play into a global luxury brand, as coveted by Westerners as a Birkin bag is by Asians? Yes, but Yuval Atsmon, a partner at McKinsey specializing in China, says that for now the goal is still to win with Chinese customers. “Part of having a presence in Paris or London can be about bringing credibility back home,” he says. “If I’m a Chinese tourist on the Champs-Élysées and see a Chinese brand sitting there next door to Chanel, it helps.”
Yet Kering’s purchase, which closed in January 2013, comes as China’s growth has slowed and the new Xi Jinping government has cracked down on extravagant gift giving by the political class. On a recent visit to Qeelin’s store near the Park Hyatt hotel in Beijing’s Yintai Center, the store was empty; when asked about store traffic, a saleswoman said, “Oh, no busy.”
This slowdown is impacting all luxury retailers in China. High-end watches there have suffered double-digit declines, according to Luca Solca, managing director at Exane BNP Paribas. And Kering’s most important division, Gucci, saw overall sales rise just 0.6% in the third quarter of 2013, both because of the gifting issue in China and also because items with big logos, obvious status symbols for the upwardly mobile, are now being rejected by the new elite, who want items perceived as even more exclusive. Gucci is now reconfiguring its product line to include fewer logos and more handbags and other ultraluxe items that only the truly elite will recognize.
There’s good reason Qeelin gems could fill that bill too. High-end jewelry remains a very fragmented market and is growing quickly even amid the overall slowdown — up in the high double digits annually in China, says Solca. And since only 20% of the global $75 billion industry is branded, according to estimates from Bain and Altagamma, there is an opportunity to build a local name. The Chinese are beginning to embrace Western habits too, such as giving engagement rings, which are showing an annual growth rate of almost 24%, according to Vontobel Research.
There is also the psychological element of how a rising culture expresses itself, especially one as powerful and long-lived as China’s. Although today luxury is about being able to afford the best goods of the West, many China watchers say the next step is to export the culture in the other direction. Says Solca: “It’s like an option call. This is a way to get some exposure to Asian brands at a time when it’s not clear what the consumer may want to buy in five to 10 years.” Will that be bejeweled panda pendants? Kering will be ready if it is.
Additional reporting by Scott Cendrowski
This story is from the January 13, 2014 issue of Fortune.