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.’