China has become the largest art market in the world. This could have important consequences for Chinese cities.
The new urban upper class has rediscovered its heritage and has been exploring new artistic trends. Thanks to China’s new passion for art, fresh talents have emerged and have been widely recognized. Chinese art lovers are flocking to the main international art market centres, where auction houses cater to the new clientele, offering Chinese language services.
Since 2010, China has progressively come to dominate the art market. In 2011, China represented 41.4% of global fine art auction sales revenue, while the USA and the UK lagged far behind, with 23.6% and 19.4%, respectively1. Does this mean that Chinese cities have caught up with – and surpassed – New York and London as the leading auction marketplaces?
If we take a closer look at China’s art market, we notice, first of all, that this market is concentrated within a few cities. Beijing and Hong Kong represent the lion’s share of the market, although Shanghai and some other provincial capitals, such as Hangzhou, are making progress.
Nevertheless, Hong Kong is still the main artistic hub. In China, Hong Kong has played a similar role to Monaco vis-à-vis the French market. Because foreign auction houses were not allowed to operate in France until 2000, during the 60’s American Sotheby’s set up in Monaco, where French customers could easily buy pieces of fine art. Sotheby’s and Christie’s, the two main rivals, began looking to Asia in the 70’s and 80’s, opening offices in Hong Kong in 1973 and 1986 respectively. There, these companies could operate in a very business-friendly environment thanks to a reliable legal framework, the absence of taxes and the role of Hong Kong as Asia’s main hub. When China started to open up to the world, auction houses based in Hong Kong saw new perspectives and increased their activities. It would appear that Hong Kong will continue to be an important marketplace for art in Asia, thanks to its tax policy, its financial power and the legal environment the city offers to its clientele.
The rise of auction houses in Beijing is much more recent. Although many auction firms operate in China, the market is dominated by two groups, “Guardian”, a private company, and “Poly”, a state-owned company that is run by the army. Sotheby’s is also active in China through a joint venture with a public group2. Although revenues produced by auctions held in Beijing in 2011 surpassed those in Hong Kong in the same year, one may well have doubts about the sustainability of this trend. First, some of the top bids at China’s auction houses may be the result of corruption, as described by Jia Guo3. The strong links between auction houses and the authorities may have helped to boost Beijing as China’s art capital4. However, these unhealthy connections could also hasten its fall. In the last two years, several cases of fake works of art have been revealed. The Beijing Review a state-owned weekly, and CCTV, China’s national TV group, reported several irregularities 56.
Consequently, it is quite possible that the tremendous development of art auctions in China is fragile. The key to success for auction houses is based on respectability and trust. Christie’s, the world largest auction house, was founded in 1766. The history of Dorotheum, Vienna’s leading auction house, can be traced back to 1707. These companies have been successful because they deliver reliable services and are perceived by art lovers as trustworthy.
For all these reasons, we feel that, where art sales are concerned, the Chinese authorities need to better regulate the industry, open the market to foreign companies and sever the links between auction houses and local authorities. The initial result of such policies would perhaps be a decline in art sale revenues, but these measures would also reduce art speculation, make transactions more transparent, and thus render the development of China’s art industry more sustainable. It would help Beijing and cities other than Hong Kong to become international or regional art marketplaces.
- Art Market Trends 2011, Art Price, http://imgpublic.artprice.com/pdf/trends2011_en.pdf accessed March 5, 2013
- Chow, J. (2012, September 21), Sotheby’s to Sell Art in China. The Wall Street Journal, http://online.wsj.com/article/SB10000872396390444032404578010182116495600.html accessed March 5, 2013
- Guo, J. (2011) What Drives the Chinese Art Market? The Case of Elegant Bribery). Columbia Business School,
http://www4.gsb.columbia.edu/filemgr?&file_id=7312137 accessed March 5, 2013
- Why Beijing rules big art auctions and Shanghai lags far behind, ( 2010, July 6), Xinhua http://news.xinhuanet.com/english2010/indepth/2010-07/06/c_13385521.htm accessed March 5, 2013
- Bai, S. (2011, October 31), For real or not, Beijing Reveiw, http://www.bjreview.com.cn/life/txt/2011-10/31/content_401830.htm accessed March 5, 2013
- Art auction boom in China, face loopholes, 2012 August 28, CCTV, http://english.cntv.cn/program/bizasia/20120821/104417.shtml accessed March 5, 2013