Sotheby’s breaks into China with first foreign auction house joint venture

Does a partnership with Beijing GeHua Art Company lock Sotheby’s in as the dominant foreign auction house in mainland China?

Sotheby’s has announced that they have signed a ten-year agreement with Beijing GeHua Art Company. The partnership makes them the only foreign auction house currently able to operate in mainland China and will allow them to organise auctions in the upcoming Beijing freeport.

Sotheby's Hong Kong sale in spring of 2012 fetched over USD316 million.

Sotheby's Hong Kong sale in spring of 2012 fetched over USD316 million.

Sotheby’s will invest USD1.2 million for an eighty percent ownership of the joint venture Sotheby’s (Beijing) Auction Co., Ltd., shared with Beijing Gehua Art Company, a subsidiary of Beijing Gehua Cultural Development Group (BGCDG). BGCDG is currently developing the Beijing Freeport in cooperation with the Swiss holding company Euroasia.

Foreign auction houses are forbidden from operating in China unless they have a Chinese partner. The contract between Sotheby’s and Gehua states that the joint venture will have exclusive rights to conduct auctions within authorised areas of the freeport and will restrict competitors from holding selling exhibitions.

The significance of the partnership comes with several qualifications. Though both Sotheby’s and Gehua have agreed on the terms of the deal, the Chinese government must still sign off on it before they can begin operations. In addition, while the freeport is slated to be fully operational in 2015, no firm date has been set.

Sotheby’s must also comply with the Chinese government’s stringent rules concerning the sale of cultural relics, limiting the scope of its mainland auctions to items such as contemporary art, wine, jewels and luxury watches. Wang Yudong, General Manager of Beijing Gehua Art Company, has confirmed that Sotheby’s Beijing will initially focus on modern and contemporary art, jewels and luxury watches.

Despite the potential issues of operating in mainland China, Sotheby’s remains optimistic about their longterm prospects in the country. As Kevin Ching, Chief Executive Officer of Sotheby’s Asia, told Xinhua News,

We are not coming to make instant profits. That’s not our premier goal. Instead, we will strategically enhance our company’s long-term presence in China and grasp the opportunities presented by the Chinese art market once auction policies for foreign companies turn more favorable.

The partnership comes in a year when many international auction houses are expanding their operations into the Asian region. In July 2012, China Guardian announced that it will host its first Hong Kong auctions in October of the same year. In addition to the Gehua partnership, 2012 saw the launch of Sotheby’s permanent exhibition space in Hong Kong and its first Asian outdoor selling exhibition in Singapore.

PR/KN/HH

Related Topics: market watch – auctionsAsia expands, art in Beijing

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