Hangzhou is yet another Chinese "shopping paradise". The city offers a superb collection of local crafts, rare arts and other souvenirs.
Some typical Hangzhou specialties and souvenirs: Hangzhou Silk, Hangzhou Embroidery, West Lake Silk Umbrellas, Tianzhu Bamboo Chopsticks, as well as White Chrysanthemum Tea and world-famous Longjing Tea.
One great place to souvenir shop in Hangzhou is the market that opens every evening on Wushan Road. Here you can avoid the high prices at Hangzhou's many tourist shops. Bargaining is not only recommended, it is required! Bargain hard and you will go home with some great deals.
Also, Hangzhou has a great outdoor silk market called the China Silk City (Zhongguo Sichou Cheng) on Fengqi Lu that runs for two blocks.
This market street is long! Most of the silk is artificial (real is too expensive for most people), but most of the stalls will have some real silk.
If you are looking for something indoors and without the stress of bargaining, explore stores like the Hangzhou Friendship Store or the shops along Jiefang Road or Yan'an Road.