Twenty years ago, art collectors from China were barely noticeable on the world-wide art market. Now, the most prestigious galleries, auction houses and even art fairs are all trying to squeeze into this Asian superpower. Why is that?
Exactly one year ago, it was forecast that there would be a great change in the global art market, due to China's closing in on the position of world leader. In 2010, the notable superpower had managed to take second place in the international art market, second only to the United States. If we take into account that in 2010, the global art market was valued at around 43 billion euros, the distance between the two top spots seemed stable enough. But, just as we can feel the coming of a storm on a hot and humid summer day, the art world was anticipating the big transition. And then it came, just as quickly and forcefully as rain falling from dark clouds. For the first time in the history of the world, China has become the leader in the global art market.
Although this comparison of China to an unpleasant weather event may seem a bleak view of the current situation in the market, it really isn't. As a result of the activity of, specifically, China's and America's collectors, the world art market managed to rebound after the crash of 2009 so quickly, that today it is barely short of the levels attained in the strongest of years. Of course, the downfall of Lehman Brothers in 2008 caused a short-term hesitancy in the consumption of art works, but that could also be seen as a sort of “catching of the breath” – necessary for a regrouping of strength. The rapid period of recuperation for contemporary art has proved not only the resiliency of this art market, but also its future stability. And in large part, thanks has to be given precisely to China. The parallels drawn between China and a menacing weather event should rather be understood as the curiosity and excitement that is often felt as a grandiose meteorological phenomenon advances.
The Flourishing of China
According to the latest research by TEFAF, last year 30% of trade in the global art market took place in China, surpassing the USA – 29%, the UK – 22%, and France – 6%. The value of the global art market last year also increased to 46.1 billion euros; that's 7% more than in 2010 and 63% more than in 2009, and just barely behind the record-setting amount set in 2007 – 48.1 billion euros. When speaking about China, one must always keep in mind the fact that the data published in this country are not always true. But even if these numbers are a bit exaggerated, even if they should actually be halved, the scope and influence of China are undeniable.
To a part of the art world, this rapid turn-around in the situation has aroused concern, but “everything isn't as simple as it may seem. China's collectors are spending huge amounts of money at China's auction houses, buying up the work of Chinese artists. This isn't a world-wide threat, however, because this growing activity is viewed as a phenomenon going on just within China itself,” as Georgina Adams (art market correspondent for The Financial Times and independent editor of The Art Newspaper) told Arterritory.com at Stockholm's MARKET art fair last February. The high level of Chinese collectors' trust in their own artists has also made an impact on Artprice's annual list of artists most in demand – last year, ten of the fifteen top spots were held by artists of Chinese descent. Even the iconic Spanish artist, Pablo Picasso, was outranked by the Chinese modernists Zhang Daqian and Qi Baishi. The total sum of works sold by these two ink painters in the last year – 500 million US dollars for Zhang Daqian, and 445 million US dollars for Qi Baishi – beat all previous records by a mile. Up till then, the record amount was set in 2010, when the total sum of all of Picasso's works sold in the 12-month period amounted to 360 million US dollars. This is only the second time in the last 15 years that Picasso has not held first place.
The competitive situation is similar among current contemporary artists. Last year's most sought-after artist, without any connection to China, was Jeff Koons, who generated interest amounting to 36 million US dollars; but this number pales in comparison to the numbers generated by Zao Wou-Ki – 90 million; Zeng Fanzhi – 51 million; Fan Zeng – 41 million; and Cui Ruzhuo – 39 million US dollars.
Of course, the collection of every art collector first concentrates on supporting artists of his or her own nationality, but then there arises the question – Will the frenzied Chinese art collectors also look to Western artists? The statistics have yet to answer this question, but examples from previous years, when some seriously established pieces came into the possession of Chinese collectors – including Picasso's “Nude, Green Leaves and Bust” (for 106.5 million US dollars) and “Femmes lisant” (for 21.4 million US dollars), as well as a drawing by Michelangelo (for 3.2 million British pounds) – indicates that such pieces are good for the wallets belonging to the new collectors from China. But only time will tell for sure.
Buying, But not Paying
Undeniably, every market has its own unique specifics, and in China's instance, one of the most salient problems is buyers refusing to pay off their winning bids. This occurs most often in the market for imperial art objects. One of the most visible cases had to do with Christie’s 2009 auction of the Yves St. Laurent collection, in which two bronze sculptures – fountainheads depicting a rat and a rabbit – were sold for 40 million US dollars. After the auction, the new owner of the pieces of art, Cai Mingchao, refused to make payment of any sort on the lot, citing patriotic reasons: Mingchao maintained that these art objects once decorated the Zodiac Fountain in the Chinese emperor's “Summer Palace”, but were looted by the French and English armies during the Opium War (around 1860).
Another, just as scandalous, case happened in November 2010, when an 18th century Qing Dynasty vase was sold at auction to the highest bidder – one of China's richest businessmen, Wang Jianlin – for 51.6 million British pounds. To this day, the owners of the vase and the auction house Bainbridges has yet to receive payment for the exclusive lot. The owners of the vase must now make a decision – how do they move forward? According to the statutes of the auction house, they cannot offer the vase for sale at other auctions, but if they try to sell through galleries or private dealers, they risk getting only a fraction of the so-very-tempting 51.6 million.
The forefront of this painting, done by the modern-day Chinese artist Zheng Hong Xiang (1983), is dominated by a person – powerful and resolute, but the face is covered by a red box. Why is that? If the box isn't supported by ropes or ties, why carry it along with you? It can be easily sensed that the young artist's works speak about modern-day China, but they are just as indicative of the region's art market. Viewing from the side-lines, the rest of the world has only a vague notion of the current market situation in China which, along with the turbulence in the nation's economic climate, is presently undergoing changes.
According to data collected by the Chinese Association for Auctioneers, it can be concluded that in the autumn of 2010, 40% of the works sold by China's auction houses – for a price of more than one million British pounds – were still not payed for six months after the auction took place. Taking into consideration that, in that year, there were approximately 685 transactions that fit into this exclusive price category, the degree of the problem is highly evident, as well as the non-transparency and imprecision of the auctions. In an attempt to halt the recurrence of situations like these, Christie’s and Sotheby's auction houses brought into force a deposit system last year, in which everyone who wishes to bid on exclusive art works must register and deposit 25,000 US dollars as guarantee of payment. Recently, there have even been cases when potential bidders at Christie’s have been asked to deposit 20% of the starting price for items that interest them. Since China now stands in first place, in terms of activity in the art market, such preventative measures taken by auction houses have some people worried about the possibility of pushing away active buyers, but a safer alternative has yet to be found.
Europeans may have a hard time understanding why somebody would want to pay millions for a porcelain vase and other similarly valued objects, but for China, these items are an important cultural legacy. Pieces such as these show up for auction just once in a decade, and it is this rarity that blows the price tags to immense proportions. It is, of course, also a chance to invest, but not only that. As Dr. Pi Li, owner of Boers-Li Gallery, revealed to Arterritory.com: “There are three reasons why people choose to acquire art – one is love, the second – investment opportunities, but the third – to validate their identity. On of these three reasons is always present, but not always is an art collector in possession of just the one. Often, collectors have a bit of all three leitmotifs, but the difference lies in their respective weight – maybe the love of art is more important to them than the opportunity to make money. This, of course, depends on the individual.”
The Farsightedness of Western Collectors
Although domestic collectors dominate in the contemporary sector of China's art market (and not only here), the first wave of art collectors formed and led the market in 1990, lasting up to about 2005, when the largest part of buyers of Chinese contemporary art came from the West. Among these farsighted business-people was the Swiss citizen Uli Sigg, as well as the Belgian Guy Ullens, who in 2007 founded the Ullens Center for Contemporary Art (UCCA) in Beijing. Although the acute Belgian collector has decided to distance himself from both acquiring Chinese contemporary art and the upkeep of an exhibition space, his previously acquired works of art are now worth tens of millions. When more than a hundred pieces from Ullens' collection were listed on Sotheby's auction program in 2011, their total selling price reached an impressive 54.7 million US dollars.
And then this last June, the art world was surprised to hear the news that Uli Sigg has decided to bestow his 167.5 million US dollar-worth art collection – which consists of 1463 pieces made by 310 different artists, including Ai Weiwei, Fang Lijun, Zhang Xiaogang, Gu Wenda, Zeng Fanzhi and Xu Bing – to the as-yet-unfinished Hong Kong contemporary art museum, M+. Specifically, it was the museum's vision of the future, and its location in relation to mainland China, that persuaded Sigg to leave his collection to Hong Kong. (Uli Sigg has taken the role of consultant at such significant art museums as London's Tate and New York's MoMA). M+, aka the Museum of Visual Culture, is being constructed as part of Hong Kong's growing West Kowloon Cultural District, the planning of which was started already in 2006. The museum's new building is set to be finished no earlier than 2017.
Progressing Towards Hong Kong
It is already quite clear that Hong Kong's role as Asia's cultural center is gaining strength, which could be attributed to the city's historic relationship with Great Britain and its one-time position as Europe's most important access point to the whole region of Asia. The great metropolis now receives foreign investors and their business ideas, which wouldn't be able to be materialized elsewhere in China. Of course, the 0% import/export tax, which also applies to the selling of art works, is a very attractive bonus to the art industry. It is no surprise that the world's most premier auction houses have opened their affiliates in this city. According to the latest research by ArtTactic, last year Hong Kong also became China's main center of trade in contemporary art, taking 65% of the market share (in 2010, only 46% of China's transactions in contemporary art were done in Hong Kong).
In the last year, Hong Kong has also become more desirable in the eyes of Western gallery owners, whose newest business plans are no doubt aimed at the Kowloon peninsula. With a grandiose Picasso exhibition, an affiliate of the historic Parisian Galerie Malingue was opened in 2010, and last year, Ben Brown Fine Arts settled into its new home in Hong Kong's culturally historic Pedder Building, which also happens to house a branch of the esteemed Gagosian gallery. Gallery owner Simon Lee's latest venture has opened up in Hong Kong, as have exhibition spaces by the much-lauded brands White Cube and Emmanuel Perrotin.
“Western galleries are popping up in Hong Kong one after another, and that's great. They represent serious artists, and bring an international standard to the city. From these galleries, we can learn how to present an artist, how to put together an exhibition and its catalog – everything. The best of the best is being put before our eyes, and now we can see for ourselves why this art is in such great demand. Initiatives like this give Asia a lot of new impressions. Of course, it's also a challenge, but a challenge always brings new energy with it,” Dr. Pi Li told Arterritory.com.
On the other hand, Li Danqing, representing the gallery Long March Space, chooses her words carefully, saying that “there is hope that these galleries aren't coming to Hong Kong just because of the clientèle – to get at their money – but that they contribute to the local art community. We hope that there will be more educational projects that will give local artists opportunities to show themselves also in London and New York; that there will be more interaction.”
Although the art world's current evaluation of the market is always based on past auctions and data that is accrued only quarterly or yearly, in reality, everything could already have changed. Since the data for 2012 will only be available in 2013, the Western art world must accept the assumption that these twelve months belong to China. But we already know that this Asian superpower is undergoing great changes.
Along with last autumn's auction season, a great slow-down in China's economic development was already visible, seemingly bordering with the crash of China's real estate market. The cool economic climate also brought a marked decrease in art market results, but the record-breaking spring of 2011 evened out the year, with profits, no less. The just-released data, compiled by ArtTactic, do, however, throw a veil of uncertainty over the future of the flourishing art market in this superpower. The “big four” of auction houses – Christie's, Sotheby's, China Guardian and Polly International – have confirmed that the performances of auctions held in spring 2012 fell by 32%, as compared to autumn 2011 (and by 43%, when measured against spring 2011).
When bankrupt businesses have foreclosed on the carcasses of “ghost towns”, and the state has begun to take firm control of the real estate market, the storm clouds over China start looking truly threatening. The situation in not yet critical, but to escape from the harrowing clutches of an economic crisis, this great Asian country must implement changes. A crash in China's real estate market could, of course, shake the art world with the loss of several important collectors and their continuing buying ability. But there is another option – the limit on allowable investment in the real estate market could divert investors to alternative investment interests, such as art.
As the owner of the Boers-Li Gallery revealed to Arterritory.com: “We don't feel the down-slide. If it seems as if the market is slowing down, remember that these numbers are being generated by secondary art market statistics – data from auction houses that are available to all. But there is no doubt that the secondary market has suffered from the market down-slide. And, if we assume that the secondary market is the main guide in China's art market, then that is true.”
“The current offerings up for auction largely reflect the past – the 80's and the 90's, but in my opinion, the art market and artists have now diversified themselves. Conceptual artists have come aboard, and China's artists are now actively cooperating with the West and international galleries,” explains Li Danqing from Long March Space. “If I had to answer, then I'd say that no, the art market has not slowed down,” continues the gallery owner, “but I would be happy to see changes – in which the primary art market would gain strength and the secondary one would become more rational. Everything depends on from which side you are looking at it.”