How can pure cashmere sweaters cost £500 on Bond Street but less than £50 at Marks & Spencer? The short answer is China. The long answer is that a label saying “100% cashmere” tells only 50% of the story.

Cashmere is the downy undercoat grown by goats in extreme cold. The great majority of the world’s cashmere comes from Inner Mongolia (an autonomous region of China) and Mongolia (aka Outer Mongolia), where 40m goats contend with temperatures below -30°C. In the spring, as they start to moult, the goats are combed to remove their fine underhair while leaving the outercoat (guard hair) intact. The combings are then washed and “dehaired” of any stray guard hair, so that what is left is pure cashmere.

Pure is not an absolute term. The finest cashmere consists only of the whitest, longest, thinnest hair from the underfleece, whereas lower-quality cashmere may be either the shorter, coarser hair from the undercoat–typically from the rear end of the animal rather than its belly–or, more dubiously, shorter hair that has either not been properly dehaired or, worse still, blended with yak or rabbit hair. When the best white (dehaired) cashmere costs $75 per kilo and one sweater requires at least 200g of fibre, the motive for mass-producers to use cheaper stuff becomes clear.

Cheap cashmere is a 21st-century phenomenon. As recently as the 1990s, China and Mongolia were exporting more raw material than finished garments. The cream of the crop went to Scotland and Italy to be spun, dyed and knitted. The costs and expertise involved made it a luxury product, though styles were mostly plain and came in colours–navy blue, bottle green–as staid as the plaid they were meant to be worn with.

Two things shook cashmere out of its heritage niche. In the mid-1990s young designers such as Clements Ribeiro put creative cashmere on the catwalk, while stalwarts like Pringle and Ballantyne broadened their ranges beyond the Argyle pattern that had made them famous in the era of Edward and Mrs Simpson. More significantly, China began to manufacture cashmere in vast volumes; when European Union import quotas were relaxed in 2005, cashmere poured onto British high streets at unheard-of prices.

Today Asda sells men’s “pure cashmere” V-necks for £17.50. M&S’s basics now cost £49.50. How do they do it? By mass production–M&S cashmere is made by the Chinese cashmere giant King Deer, which can process 400,000 units at a time–and by cutting corners. The fibre has a hair length of 28-30mm (premium is 36mm-plus) and it is knitted lightly. So the customer gets inferior material, and less of it.

Yet even cheap cashmere can feel lovely. It’s hard to know, as you queue at the till, whether your bargain will pill or sag within days. (Pilling afflicts expensive cashmere too, though it should stop after the first wash.) But there are subtle signs of quality, and once you’ve got your eye in, much of the cheaper cashmere on the market starts to seem a false economy.

Look for tension in the knitting: stretch a section and it should ping back into shape. Hold it up to the light and you shouldn’t see much sky: paradoxically, the best cashmere, though made from the finest hair, has a density to it. Examine its surface: fluffiness suggests the yarn was spun from shorter, weaker fibres and will pill. Be sceptical about softness, too. Over-milling can make a garment too soft and silky, and therefore prone to bobbling and losing its shape. More expensive cashmere may be harder to handle in the shop, but will ease up with wear and hand-washing. The best cashmere actually improves with age–so long as the moths don’t get to it.

Another pointer to authenticity is candour. Pure Collection reveals the specification of its cashmere on its website: “Inner Mongolian White for White, 36-38mm, maximum 15.5 micron”. That’s just about the whitest, longest, thinnest goat hair available. Brora says it uses only the “longer fibres”. At the luxury end, Brunello Cucinelli makes the startling claim that “only the fur in a very limited area of the animal’s throat is used”, while Loro Piana’s “baby cashmere” is made of kid-hair with a diameter of just 13-13.5micron. M&S failed to respond to my questions about the provenance of its cashmere.

Brora and Pure Collection (whose founders own N Peal) score on sustainability, too. Cashmere is a renewable–it grows every winter—but the goats are not exactly eco-warriors. The trouble is they don’t nibble grass, but yank it up by the root. With no vegetation to pin it down, the topsoil blows away, grasslands turn to desert and duststorms choke Beijing. For cashmere to be sustainable, the goats must be farmed in enclosures and given extra feed so they don’t nuke the grass.

The recession has driven down prices in Europe, but it is hard to see them staying so low. Meanwhile, mid-priced cashmere looks good value. Pure Collection has basics from £89. Brora costs more (from £169 for a V-neck) because it is made in Scotland, and Scottish cashmere has long been considered the best—but Chinese knitting machines can now deliver on sophistication as well as price. Consequently, Pure Collection and N Peal run a vertical operation in Inner Mongolia where quality can be controlled “from goat to garment”.

If money were no object, and greed no sin, I’d stack my shelves with Brunello Cucinelli, not so much for the throat of the goat but the perfection of the knitting. And if money were tight, I’d settle for Uniqlo, where a well-cut crewneck costs £59.99 and seems promisingly unfluffy to touch.

What I’d find hard to contemplate is wearing anything else. Cashmere is so soft, light and warm that it makes even merino, the king of lambswool, feel a bit like a school jumper.