‘Economist’ magazine claims ‘China’s once bustling art trade is flagging’

In this week’s issue, the influential British magazine The Economist says that ‘China’s once bustling art trade is flagging’. Down at The Economist, they like their puns: the article is headed up ‘Blue period’.

viewing auction items

Down but not out . . . Chinese auction buyers in Paris

Although worldwide art sales last year reached a record $65 billion (the trackable ones, that is) according to the European Fine Art Foundation. However, while Britain and the USA boom, auction sales in mainland China amounted to $5.5 billion, 40% below their 2011 peak, according to the China Association of Auctioneers and online Artnet. Global sales last year of Chinese art and antiques $7.9 billion, down 31% from three years earlier. Russian and Brazilian art is also well down in sales performance.

However, the Chinese art market has been notoriously unpredictable. In 2005, the China art market accounted for under 5% of global sales. By 2011, its share had rocketed to 30%! Then, in 2012, the market fell back by a staggering 43% – but rebounded in 2013! Now it can be seen to have fallen back again last year. Last year, it is reckoned that more than half of auction lots exposed in Chinese sales were unsold. As a result, many potential vendors are not exposing items at auction so quality is poor at auction and that further depresses demand.

PolyCulture is the largest auctioneer in China and although the Chinese government and military effectively control it, the shares on the market have fallen by around one half since last year’s public offering. Last year, Poly expanded its own stock of art by 82% in a bid to shore up the market. Despite that, revenue slumped by 27% in the first six months of this year.

The most worrying statistic to come out of China is that last year buyers failed to pay for 63% of works ‘sold’ for over $1.5m. Those of us working in the market in the UK are also aware, from a vendor’s point of view, of works languishing in the warehouses of auctioneers, unclaimed, unloved . . . and unpaid.

Chineseart.co.uk opinion What is going on then? The clampdown by President Xi Jinping on gifts and corruption has indubitably affected the art market in China. As China sinks deeper into a potential economic mire, the brakes are going to have to come off. It won’t be sudden but gradual as it cannot appear to represent a policy U-turn. Growth is also weakened in China but, again, corrective action will be taken by the Chinese leadership. If they lose grip on an economy over which they have pretty much total control there will be a severe danger of unrest within China. The market may be down this year (and last year) but it can equally well rebound next year as new buyers emerge in China’s burgeoning middle class. There is still vast spending power in China.

Wall Street Journal spreads doom and gloom on Chinese art market

calligraphy in decline

The Wall Street Journal has spread gloom and doom on the Chinese art market over the holiday period. Its views have been repeated in articles in the national press of many countries, including The Australian (December 27, China’s Art Market in Decline).

The original article, published on December 18 in New York, draws upon a document with the weighty title of The 2012 Global Chinese Antiques and Art Auction Market Annual Statistical Report. We must confess to not having come across this annual report before, but we do note it is a report on activity during 2012. We are now in 2014 and respectfully submit that the market has changed substantially in the last two years. The onetime British Prime Minister, Harold Wilson, once famously observed that ‘a week is a long time in politics’. Two years in the current dynamic Chinese art market is an eternity.

The report is published by the well known firm of art sales records analysts, Artnet, working with The China Association of Auctioneers. Artnet claims to have compared the Chinese mainland’s principal auctions houses’ stated results with those of tax filings submitted to China’s Ministry of Commerce, suggesting a substantial over-statement of prices achieved. Surprise, surprise they have found a discrepancy between tax filings and claimed business. Frankly, you would most probably find a similar discrepancy anywhere in the West . . .

The report does note that prices remained stable for Chinese art sold elsewhere in Asia (principally Taipei, Singapore and Hong Kong) and in New York. Outside China, the average price paid for a Chinese work of art ‘hovered’ around US$56,000, compared to the 2011 figure of $55,600. Not such a bad result, really.

Meantime, prices for art sold within China dropped by nearly one third to an average of $16,300. This hardly seems surprising after the untypical mania which developed around 2008-09. It seems now to be operating at similar levels to those internationally, doubtless due to the prevalence of the internet.

The report does, however, highlight the very real area of defaults, which shows that around 40% of high level purchases were not followed through, i.e. were not paid for. This problem is almost exclusively at the high end of the market where there has been a somewhat relaxed attitude by bidders to the requirement to follow through and actually pay for purchases bid upon at public auction. This has been something of a cultural phenomenon reflecting an ignorance of the obligations incurred at the moment of bidding. It is only now that the full implications of bidding are being understood by some Chinese auction buyers.

The other element in failure to complete on purchases with auction houses is, of course, the problem of widespread forgery. When a buyer sees the artwork he has just bought described in the media, or online, as a forgery, he is unlikely to complete. Qi Baishi’s 1946 ink painting Eagle Standing on a Pine Tree was knocked down in May 2011 for a world record US$65.4m. It was the most expensive Chinese painting ever sold. But an online critic almost immediately raised doubts about its authenticity and the sale was tainted. It remains uncollected in a warehouse – and unpaid for. It also serves to dent statistical figures out of all proportion in a statistical comparison.

The forgery issue is one which has become all pervasive just in the last couple of years. It will take another year or two before auctioneers fully get a handle on it. Just a few months ago, our own business, chineseartinscotland.co.uk, bought an attractive looking cylinder jar at a well known firm of UK auctioneers. It was only when we got back to the gallery and exposed it to powerful photographic lights, that we could discern the fact that a heat transfer had been applied, bearing the imagery. In the event, the auctioneer was very decent about it, agreed with our findings and promptly returned our money. I don’t know what statistical database it went into, if any.

For newspapers, the fall of a much vaunted high value industry, for that is what the Chinese market is, makes great copy. Especially when you have spent years building it up . . . Just like buying Chinese art, the same caution applies to such coverage. Caveat emptor !

As Winston Churchill justly observed, ‘There are lies, damned lies, and statistics.’