China's auction businesses have been growing rapidly in recent years, bringing about fierce competition and an overcrowded auction market, especially in coastal provinces.

In East China's Zhejiang Province, for example, 45 new auction houses were set up last year. The province has over 260 auction houses, with some 3,000 staff.

"Many investors rushed into the industry without understanding it," an auctioneer surnamed Wang said. People mistakenly assumed it was a high-profit, low-risk business.

Wang said it was easy for investors to set up auction companies because there were few barriers to market entry. According to the Auction Law which took effect in 1997, a company can be registered with only one auctioneer and 1 million (US$120,000) yuan capital.

In addition, many companies set up representative offices outside the city where they registered, because there was no requirement to register again at local industrial and commercial bureaux.

With more auction houses and limited goods to auction, the industry has become overcrowded. Some companies have done no business since their establishment, according to Kong Zhouhang from the Auction Industry Association of Zhejiang Province.

As a result, "irregularities and violations have occurred, hurting the industry's development," said Kong.

To get goods to auction, companies have lowered their commission, or even asked for no commission. The discounting was not only disturbing the auction market, but also harming the industry's development, said auctioneer Wang.

Corruption also occurs during auctions. The procuratorates of Lishui in Zhejiang Province have discovered seven cases of bribery related to auction companies since July last year. Bribery has become an important way to get goods to auction from government organizations and enterprises. Some companies have even reached secret agreements with local courts, paying a percentage of commission to the court.

During some auctions, people also impersonate buyers to drive up selling prices. Although industrial and commercial bureaux supervise the whole auction process, they find it hard to prove that breaches have occurred and cannot stop them

Other problems lie with the auctioneers themselves. The Auction Law requires that auctioneers work only for one company full-time, but many work for several companies. Some people who do not comply with the regulations still win certification as auctioneers.

Zhou Guanlin, an official from Zhejiang Province's Economic and Trade Commission, suggests strengthening administration and supervision of the industry and its staff.

The China Association of Auction Industry implemented a new rule on the administration of auctioneers in September to address the problems, but it is still to prove whether it will be effective, said Wang Fenghai, deputy general-secretary of the association.

(China Daily February 22, 2003)