Monument to all that jazz: Shanghai's Peace Hotel, a piece of Old Europe in new China

Everyone from Noel Coward to Chiang Kai-Shek was drawn to Shanghai's Peace Hotel, famed as the most luxurious in the world. Now it is closing for a $50m facelift, reports Clifford Coonan

Standing on the top floor of Shanghai's Peace Hotel, an art deco palace once known as the Cathay Hotel, you can look out over the turrets and spires of the elegant Bund promenade and dream of a China long gone.

Across the Huangpu river, the skyscrapers of the Pudong district point to China's future, but the narrow Tudor-panelled stairwells, the intricate chandeliers and the white marble floors of the Peace Hotel are a remnant of old Europe in new China.

Noël Coward finished his play Private Lives in the penthouse suite in 1930 while fighting off a bout of the flu. Charlie Chaplin and Paulette Goddard stayed in Room 51 in March 1936, while celebrities as diverse as George Bernard Shaw and the Nationalist leader "Generalissimo" Chiang Kai-shek have all stayed here.

Few buildings anywhere give you quite the same feeling of being on a movie set; the hotel is a vista into a different era. It's easy to imagine dinner-jacketed European overlords and their fragrant lady escorts alighting from rickshaws pulled by downtrodden coolies, as recently seen in the films The Painted Veil or The White Countess.

In 1992, the Peace Hotel was listed as one of the famous hotels of the world by the World Hotel Association, the only Chinese hotel to receive this listing. Inevitably, its old-fashioned scale has rendered it increasingly anachronistic in a modern city where Grand Hyatts and Sheratons are the yardsticks by which hotels must be measured.

Jinjiang Group, which owns the Peace Hotel, has just announced the hotel will close for a year in March for renovation. The hotel's amiable public relations officer, Ma Yongzhang, promises the hotel will lose nothing of its charm, and says that the owners are making such stringent efforts to retain the hotel's ambience that the refurbishment will cost them more than building a five-star hotel from scratch.

The hotel has certainly seen some radical changes over the years. Located at 19A on the Bund, the Cathay Hotel was built in the Gothic style of the Chicago School, by Sir Victor Sassoon, a British Sephardic Jew who, like the Jardines, built his business empire selling opium and guns and put his money into real estate in Shanghai. Sassoon was one of the richest men in Shanghai and owned more than 1,900 buildings by the time of the revolution in 1949, a larger-than-life character who once famously said: "There is only one race better than the Jews and that's the derby." The southern wing, which is known as the Palace Hotel, was completed in 1906 and soon became a sought-after address in China .

In 1909 an Opium conference was held here, and in 1911, Sun Yat-Sen stopped over in Shanghai en route to Nanjing to take over his position as provisional president of China and a reception was held in the hotel for him. In 1927, Chiang Kai-shek and Soong Mei-ling held their engagement ceremony at the Palace.

Sassoon began work on the northern wing, now the main building in the hotel, across the street in 1926. He opened the Cathay, also known as Sassoon House, slap bang in the middle of the jazz age, when Shanghai earned its reputation as "The Paris of the East" or "The City of Blazing Night". Or, more notoriously, as "The Whore of the Orient", rife with prostitution and opium powder.

The city's bawdy wealth and loose-living ways were then the envy of a world reeling from the deprivations of the Great Depression. In Shanghai, the champagne was sold by the case, the ragtime played all night and the bars never seemed to close.

The Cathay Hotel had a private plumbing system with water channelled in from a spring outside the city. Guests could bathe in marble baths with silver taps. Vitreous china lavatories were brought in from Britain.

Located on the corner of busy Nanjing Road and the Bund, the hotel is an enduring monument to the unbridled capitalism and cosmopolitan chic of the privileged few of the 1920s and 1930s.

Like the Ritz in London, the Peninsula in Hong Kong or Raffles in Singapore, the Cathay was a hotel inseparable from the city where it was situated. Throughout its environs there are remnants of the pre-communist era. The clocks in the lobby tell the time in New York, Moscow, Tokyo and, strangely, Hawaii. Narrow stairways lead up to elegant mezzanines lined with books.

Travellers from all over the globe were drawn to what was the most luxurious hotel in the world when it opened, with its copper-green, pyramid-shaped top, smooth revolving doors, copper chandeliers in the art deco style and Italian marble floors.

Sassoon was building at a time when the foreign powers were confident of a glorious future in China, establishing trading footholds in the potentially enormous Chinese market through the concessions granted them by various treaties, which are still a source of humiliation to the Chinese. "The future of Shanghai is a glowing one," Sassoon wrote in January 1928, an optimistic note which took shape in the granite tower rising 12 storeys above the Bund, designed by P & T Architects Limited (Palmer and Turner), and culminating in a copper roof, below which was tucked Sassoon's private balcony high above the city.

The Tower nightclub on the top floor was where Sassoon held his fashionable private parties, legendary in Shanghai's demi-monde. The elevator to the bottom floor goes to G rather than 1, which is where the ground floor is in China. Post-communist China, that is.

"This is British style, to stop on the ground floor. We've had to change the lift to stop it stopping at 1. Chinese people get confused," said Mr Ma, during a tour of the hotel's sights. The National Deluxe Suites are a small wonder of preservation, a snapshot of 1930s lifestyle. They include Chinese, British, American, French, Japanese, Italian, German, Indian and Spanish rooms, all elegantly decorated and carefully preserved in original 1930s style.

The city's foreign residents, who became known as Shanghailanders, were made up of thousands of refugees - White Russians fleeing the Bolsheviks, Jews fleeing Hitler, but also young British and American men looking for adventure.

And it wasn't all pink fizz and party till you drop. Expatriate business people with their families also came, such as the writer J G Ballard's father, who managed a factory in Shanghai. It was from the Cathay Hotel that the young Ballard watches the Japanese take the city. This scene was later dramatised in the Steven Spielberg film of Ballard's book, Empire of the Sun, which was the first Hollywood movie to be filmed in China after 1949.

Some of the jazz men in the bar, which used to be called the Horse and Hound, can remember playing the jitterbug at a time when Britons, Americans, French, Germans and Japanese ran the city.

The band still plays the old-time jazz favoured during the era - their average age is 75 - just as they did for the Shanghailanders, and, in later years, for presidents Ronald Reagan and Bill Clinton.

The Cathay Hotel was closed in 1950 after the communist revolution, and reopened in 1956 as the Peace Hotel. Of course, the Peace Hotel has the usual five-star facilities such as a gymnasium, business centre and beauty salon. And yet it retains a certain atmosphere, something apart from the blandness which characterises so many modern luxury hotels.

The rooms are comfortable but dark in a way you would never expect of a top-class hotel these days, and of a smaller scale than a five-star hotel in the West. It has a fabulously dated feel, almost haunted, and it's hard to see how this atmosphere will survive refurbishment.

The hotel has always had a reputation for being conducive to good diplomacy and some crucial meetings have taken place behind the art deco Lalique glass doors of the Ninth Heaven banqueting hall. In this room, the Chinese Premier Zhou Enlai met his French counterpart Edgar Faure in January 1964. A few days later, China and France re-established diplomatic relations. Ping-pong diplomacy even took place at the Peace Hotel, when members of the US table tennis delegation stayed there during their visit to China in 1971.

Field Marshal Montgomery stayed in Room 72 during a visit to China in 1960. Edgar Snow, the American journalist and author of The Red Star over China, stayed in the room next door, in the same year. The boxing legend Muhammad Ali stayed in Room 643 with his wife Lonnie during a visit to Shanghai in May 1994.

Despite such illustrious guests, some of the arrivals at the Peace Hotel dislike the dated feel and have complained. And post-revolution construction has led to the current lobby being much reduced, with a bank branch occupying a big section of what used to be a much larger reception area to the hotel. Difficulties with establishing who owns the title have made it difficult to restore the lobby to its full splendour over the years.

All of which has prompted the owners to refurbish it, reportedly in the style of the Waldorf Astoria Hotel in Manhattan. Many of the hotel's regulars are coming back for one last stay before the year-long closure, said Mr Ma.

"Guests have been calling to say they would miss the old hotel. They will receive the old-style butler services and will be served traditional dishes," he said.

According to the Shanghai Morning Post, the renovation will cost around $50m (£26m), and the hotel will lose $12.5m in earnings during the year.