State of the art market

Updated: 2013-03-08 07:11

By Sun Yuanqing (China Daily)

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 State of the art market

As the spring auction season looms, China Guardian says it will be looking for an increase of 10 percent on its autumn sales. Provided to China Daily

State of the art market

China's art auctioneers search for more sophisticated ways to hammer the market back into shape

China became the world's largest art market almost two years ago due to the vast amount of Chinese artworks sought by the country's burgeoning wealthy elite. Then, having reached that peak, the market had more than a little shock art sales fell by about 40 percent last year.

However, the bigger picture facing the auction houses in China is a simple one - international markets have fared litter better, China's is still the biggest, and they are now going for quality more than quantity in sales. Everybody is becoming more discriminating in their choices.

"We used to compete over who can sell more," says Hu Yanyan, vice-president of China Guardian Auctions, the world's fourth largest auction company and China's second. "Now we are seeing who can sell the better work. The competition is just as fierce as it was in the heyday, but with a different emphasis."

Following its last spring auction, Guardian cut its offerings of Chinese ink painting and calligraphy, one of its major categories, by a quarter.

Related reading: More going, going, gone in China

Sotheby's Asia is also focusing more on quality in its Hong Kong spring auction next month.

"We won't collect too much when the market is not strong," says CEO Kevin Ching. "We've been trying to select things that are fresh to the market and have clearer sources."

And according to auctioneer Christie's Asia president Francois Curiel, "Chinese collectors are paying more attention to the quality of art. In the end, they are only interested in works that are reasonably priced and clearly sourced."

In 2011 China overtook the US to become the largest art market worldwide, accounting for 30 percent of art auction and dealer sales, a report by the European Fine Art Foundation says.

But the market slowed last year, particularly in China with sales down 40 percent to 614 billion yuan ($98.6 billion; 76 billion euros) according to research firm Art Market Monitor of Artron in Beijing.

Only six pieces sold for more than 100 million yuan last year, compared with 26 in 2011.

Chinese contemporary art, which had risen dramatically in sales in previous years, not surprisingly experienced the largest decline among all categories.

Sotheby's Hong Kong raised HK$2 billion ($258 million; 198 million euros) in its 2012 autumn auction, compared with HK$3.2 billion in autumn 2011, a 37.5 percent drop.

Poly International Auction in Beijing, China's leading auction house and third largest globally after Sotheby's and Christie's, took 2.31 billion yuan in its autumn auction last year, down 53 percent from 2011.

The retreat of ready money from institutional and individual investors is one of the main reasons for the decline, says Guan Yu, director and general manager of AMMA.

The art market in China had been surging due to a loosening in monetary policy after the 2008 global financial crisis. As the government tightened credit in late 2010, the art market started to slow down, Guan says.

"China's art market is increasingly related to the capital market. It now depends heavily on liquidity."

While many art dealers in the West come from the art world and have more reasonable expectations regarding investment returns and appreciation cycles, most Chinese collectors lack that background and tend to be more speculative, she says.

Among them is Liu Tao, who runs an apparel factory in Ningbo in the southern province of Zhejiang and who has been collecting art for more than 20 years.

With a shortage of capital for his business, Liu went to almost every auction in Beijing last year, hoping to sell some of his collection.

"I sold only 50 percent of what I submitted at Poly's autumn auction," Liu says, attending his final auction on the last day of 2012. "This time, I sold only 40 percent."

A crackdown by the Chinese authorities on tax evasion on imported artworks also contributed to the gloomy picture last year.

It is reported that art collected overseas - mostly Chinese ink paintings, calligraphy and ceramics - accounted for 30 percent of sales and 50 percent of profits in China.

There is no clear regulation on tax on imported artworks, adding to uncertainty in the market.

"It's like a sword hanging on your head that can drop any time," says Ji Tao, a veteran auctioneer in Beijing. "No one knows if they should collect art from overseas anymore."

At the same time, collectors have become more reluctant to sell when prices are falling.

"The real problem is the scarcity of top quality pieces," adds Guan. "As the market slows, the collectors tend to look on, waiting for the next bull market, but 2010 and 2011 were so vigorous that a huge number of the sources have been exhausted. What is left is no longer enough to support market growth."

Poly International went to 16 countries last year to gather works for auction, and plans to visit 18 this year.

However, the slowdown is not all bad for the market's long-term development; with speculators drifting away, it is now left with genuine art lovers and long-term investors, who demand a higher level of quality and service, Guardian's Hu says.

"Everyone sells Zhang Daqian (a prodigious traditionalist painter 1899-1983)," Hu says. "The point now is how to pick a better piece and present its value better. This was not as important when the market was strong. It could absorb almost anything at that time."

Guardian is holding an auction of ink paintings by Zhang Daqian this spring. Although these works are "more on the simple side", their appeal can be enhanced by a different business approach, Hu says.

"We used to do nothing other than buying and selling. That kind of general business approach is no longer feasible," Hu says.

With the old sectors showing signs of fatigue, auctioneers are exploring new areas.

Poly International is offering a new category, garden furniture from the Ming and Qing dynasties (960-1911) this spring, banking on the growing number of villa owners in China.

The auction house does business in more than 30 categories, and has recently ventured into private consulting business, "to cope with all kinds of crisis", says its executive director, Zhao Xu.

Second-tier cities that were once considered "too far away" are now being added to the sourcing itineraries of auction houses.

A close relationship with clients is more important than ever, auctioneers say.

"We have to show more initiative," says Dong Jun, general manager of Beijing Forever Auctions, Christie's brand licensee in China. "We might have backed off from dealing with some people in the past, but not now."

Beijing Forever is also considering setting up new categories, such as limited-edition luxury items and affordable modern art.

Ching of Sotheby's Asia says he expects "significant growth" this year, based on such factors such as new political leadership, a stronger stock market and looser credit controls from the Chinese government over the past few months.

Zhao of Poly says his company hopes to match 2012 this year, while Guardian is looking for a 10 percent increase in sales at this spring auction over last autumn's.

"We expect a 30 percent rise this spring from last autumn," says Dong of Beijing Forever.

AMMA director Guan Yu says: "The worse the market, the more critical the timing is for an auction house to find its legs. If you survive the worst time, you get the best of the next round."

(China Daily 03/08/2013 page10)