How often does a city actually play a leading role in a fashion show? It happened tonight in Shanghai, where the spectacular twenty-first-century skyline and teeming waterfront—complete with kaleidoscopic neon, Jetsons-meets-Blade Runner towers, improbable glittering disco-ball telecommunications installations, and fast-moving pleasure boats, barges, and tugs—became the live, moving backdrop to Chanel's Paris-Shanghai pre-fall runway. As a thousand guests sat on a darkened pontoon moored in the Huangpu River, models ranged to and fro in front of a translucent wall, so the speedy, dirty, visually thrilling urban nightscape became, as Karl Lagerfeld put it, "the set."

The designer played the collection fast and loose, a multidimensional fantasia that dipped deeply into Shanghai's louche past as the Paris of the East. Clothes-wise it involved glancing references to Chinese sartorial history, from the terra-cotta army through cheongsams, Mandarin split-sided Qipao gowns, deep lacquer-red embellishments and silk linings, Mongolian tapestry boots and shaggy furs, and spins on Communist Mao suits and comrade caps.

Did Gabrielle Chanel ever set foot in the gambling parlors; opium dens; and shady, glamorous nightclubs of twenties and thirties Shanghai? Well, no. The collection yielded covetable gilded embroidery in the form of a Chinese cabinet on a windowpane tweed suit, camellias carved into the surfaces of black leather leggings, and a military quilted vest, but the elaborate justification for this latest flex of Chanel's corporate muscle was a Lagerfeld-directed movie, Paris-Shanghai: A Fantasy, starring the designer's inner-circle favorites. Amanda Harlech impersonated the Duchess of Windsor, and Freja Beha Erichsen and Baptiste Giabiconi played a pair of young Communists, while the convincing Coco look-alike Jane Schmitt dreamed her way from an afternoon nap in her chinoiserie-decorated Rue Cambon apartment through various sequences in Old Shanghai—not forgetting an encounter with Marlene Dietrich on the way.

Tongue-in-cheek it may have been—Mademoiselle's love of chinoiserie allegedly went so deep that, among other things, she based the design of her bag on Chinese quilting. Who knew? But the film elicited much good-humored laughter from the crowd of Shanghainese beautiful people before everyone migrated across the road for a vast cabaret party at the recently restored Deco Peninsula Hotel.

The point—other than a platform for the workmanship of the house's specialist craftspeople in its Métiers d'Art, and an outlet for Lagerfeld's interest in filmmaking? A giant social power play for the eminence of brand Chanel in China, of course. To judge by the young, exquisitely dressed women outfitted top to toe in Chanel in the audience, this market, if not quite as booming as it was two years ago, is visibly open to more expansion where a trusted CC investment is concerned. Chanel just opened a store on the Bund opposite the show venue, and it's been packed with people all week—including, at peak times, several couples occupying the jewelry department, looking bent on acquisition.