China's booming art market suffers reality check

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Abstraction, by Zao Wou-ki(Zhao Wuji in Pinyin). [China Daily]

A total of 140 pieces of art, including Chinese painter Zhao Wuji's (also known as Zao Wou-ki in French)'"Abstraction," was scheduled to be auctioned by Sotheby's on Sunday in Tianzhu Free Trade Zone in Beijing's suburban district of Shunyi.

It is Sotheby's first major auction on the Chinese mainland, which will help introduce the foreign brand to the vast inland market, said Cheng Shoukang, CEO of Sotheby's Asia.

The auction is a part of Beijing Art Week held jointly by Sotheby's and its joint venture partner, Beijing Gehua Cultural Development Group (BGCDG). The auction will offer modern and contemporary Chinese works with a total estimated value of more than 130 million yuan ($21.2 million).

The auction will also showcase the practice and culture of the duty-free zone, according to Li Danyang, general manager of BGCDG.

"It is a move under the Communist Party of China's call that the country will deepen reform in its cultural system. It will help make Beijing an international cultural hub," according to Li.

Approved by China's Cabinet, or State Council, in July 2008, the Tianzhu Free Trade Zone is the country's first airport-based free trade zone.

China charges duties of up to 26 percent for imported artwork. "However, duty will be exempt and won't be charged within the freeport and it provides a tariff-free storage service," Li said.

Market craze

Auctioned in October at Hong Kong Sotheby's, a painting by Zeng Fanzhi went for $23.2 million. It set a new record for a contemporary Chinese artist.

With $12.02 billion, China is the world's biggest auction market for art and collectibles, the French government's Conseil des Ventes art market report for 2012 said.

It is two decades since the country's first auction house was launched in 1993, when the opening of China Guardian Co Ltd allowed the public to trade art for the first time.

Since then, the market has grown.

In 2009, because of the amounts that were being spent, the "era of 100 million yuan" had arrived.

"The craze of the market has a close connection with the prosperity of our country," said Yu Ding, dean of Art Administration Department of Central Academy of Fine Art (CAFA).

With more disposable money at hand, people seek an investment opportunity, Yu added.

"Considering what's happening in the stock markets, an excessive amount of money is coming into auctions to bargain hunt, " said Gong Jisui, a professor with CAFA.

The volatility found in property and stock markets no longer promises returns, Gong said.

Hundreds of auction houses have opened over the past decade trying to attract the millionaire class. As a result goliaths like Beijing Poly International Auction Co Ltd and China Guardian Auctions Co Ltd have emerged.

Also, Sotheby's and Christie's have entered the market since 2012.

In October last year, Sotheby's hosted an inaugural auction in Beijing. Christie's hosted its first auction in Shanghai in September, selling $25 million worth of art, jewelry, watches and wine. Sunday's auction was much bigger.

Forgery

But the market has problems.

Analysts have questioned China's art market because of ubiquitous fakes, alleged price rigging and nonpayment.

Fakes are common in art auctions.

Art dealer Lu Jiemin said Chinese law allowed auction houses to have clauses in contracts which exempts them from any obligation if a lot turns out to be a fake.

Therefore, the market has been largely driven by the lure of huge and swift profits.

Wei Pengju, Dean of Cultural Creative Department of Beijing-based Central University of Financial and Economics said the art market is dominated by giant financial organizations.

These may squeeze small investors and individuals who actually care about art, Wei said. "Buyers should be people who are really into it, not those who buy then sell for a good price."