Slump continues in global market for Chinese art while Hong Kong holds strong – artnet report

Art Radar analyses the highlights of artnet’s Global Chinese Art Auction Market Report 2014. 

The third edition of artnet’s annual report on the Chinese art market reveals plunging sales and an escalating non-payment problem. Meanwhile, Hong Kong bolsters the external market for Chinese art.

Fang Lijun, 'Series 2 N°4', 1992, oil on canvas, 200 x 200 cm. Image courtesy Sotheby’s.

Fang Lijun, ‘Series 2 N°4’, 1992, oil on canvas, 200 x 200 cm. Image courtesy Sotheby’s.

Last week artnet released its Global Chinese Art Auction Market Report 2014 (PDF download), published in collaboration with the China Association of Auctioneers. Now in its third edition, the annual report is, as it states,

the only report of its kind to publish auction results from mainland China that have been vetted by a third party organisation with insider knowledge of the state of the market in China.

Sales down 31% from 2011

According to the report, the global auction market for Chinese art and antiques continued to cool off in 2014. Worldwide sales fell to USD7.9 billion, a 7% decrease from 2013 and a 31.3% decline since the 2011 market peak. While the number of globally consigned lots in 2014 was comparable to 2013, demand fell considerably, with the sell-through rate dropping to a five-year low of 48.1%.

Cultural economist Dr. Clare McAndrew, who penned the report’s introduction, cites economic slowdown and a low supply of high-quality lots as factors in the lack of growth. She writes:

One of the key reasons for subdued sales over 2014 was a lack of high-quality lots entering the marketplace […] a large volume of the highest quality tradable works were sold to museums and serious private collectors in the period up to 2011. These works, therefore, have not reappeared on the market in the last two years, and remain unlikely to do so in the short-to-medium term, which could further dampen growth.

In addition to economic factors, McAndrew also notes that increased government security and official scrutiny of transactions, conducted as part of China’s country-wide anti-corruption policies, also “appear to [have] had a notable effect on the market”.

Dr. Clare McAndrew presenting the Art Market Report 2014. Photo by Loraine Bodewes. Image courtesy TEFAF Maastricht.

Dr. Clare McAndrew presenting the Art Market Report 2014. Photo by Loraine Bodewes. Image courtesy TEFAF Maastricht.

Hong Kong holds strong

As the report reveals, mainland China “remains the primary centre for the auction of Chinese art, representing 70.7% of global sales”. Accounting for 70% of the domestic art market, with gallery sales representing the remaining percentage, this internal auction market fell 9.3% year-on-year from 2013 and 40% from the 2011 high.

While sales in mainland China plunged, the overseas auction market remained considerably more stable, displaying only a marginal decrease of 1.1%. Categorised as part of the external market, Hong Kong’s leading performance bolstered Asia’s 5.3% increase in sales in 2014. McAndrew writes that the “critical Hong Kong […] market performed relatively well, rising 5% in value year-on-year, to $1.8 billion (around 80% of the market share outside China)”. As Bloomberg summarises,

Hong Kong bucked the [global] decline […] Its global share also grew from 19 percent to 21 percent, as mainland auction houses China Guardian Auctions Co. Ltd. and Poly Culture Group Corp. have increased their presence there since launching Hong Kong sales in 2012.

According to another artnet article commenting on the report, “[f]our of the five highest selling artworks of 2014 were sold in Hong Kong”. The top highest prices were fetched by two 15th century pieces: an Imperial embroidered silk thangka sold at Christie’s Hong Kong for $45.2 million, and a Meiyantang porcelain “chicken cup” sold at Sotheby’s Hong Kong for $36 million. 

Sales in Europe and North America were much weaker, falling 29.7% and 8.0% respectively. According to the report, North America took over Europe to become the second-largest external market for Chinese art.

Zhang Xiaogang, 'Bloodline - The Big Family No.3', 1995, oil on canvas, 179 x 229 cm. Image courtesy Sotheby's.

Zhang Xiaogang, ‘Bloodline – The Big Family No.3’, 1995, oil on canvas, 179 x 229 cm. Image courtesy Sotheby’s.

Escalating non-payment

The report also highlights a growing concern facing the Chinese auction market – non-payment for purchased works. In 2014, 63% of lots sold for over ¥10 million were either unpaid or only partially paid for, according to the report. Such a non-payment rate is up a drastic 22% from 2013.

According to Bloomberg, major auction houses Christie’s and Sotheby’s implement rigorous financial controls to counteract the problem. Rebecca Wei, Managing Director of Christie’s Asia, tells Bloomberg

We have stringent policies in place both before and after the auctions to ensure payout […] includ[ing] due diligence on clients’ financial background, deposit requests prior to pedal registration, as well as stringent measures to track the collection process post auction.

Wei tells Bloomberg that Christie’s “payout rate has been excellent, for both [their] Hong Kong and Shanghai sales”. Likewise, Sotheby’s declares that non-payment is not a major problem for the company. “Our average payment default rate over the past two years was less than 1 percent”, a spokesperson tells Bloomberg.

Zeng Fanzhi (b. 1964), 'Mask Series', 1999, oil on canvas, 108.8 x 108.8 cm. Sold for HKD7.24 million (USD937,976), 1st in the top 10 lots at the Asian Contemporary Art Day Sale, 23 November 2014, Christie's Hong Kong. Image courtesy Christie's.

Zeng Fanzhi, ‘Mask Series’, 1999, oil on canvas, 108.8 x 108.8 cm. Sold for HKD7.24 million (USD937,976), 1st in the top 10 lots at the Asian Contemporary Art Day Sale, 23 November 2014, Christie’s Hong Kong. Image courtesy Christie’s.

Looking ahead

As McAndrew writes at the end of her introductory essay, global auction results from the first half of 2015 have not improved from the spring results of 2014, “indicating that performance continues to be poor in some sectors this year”. McAndrew cites fleeing speculators as a reason for the continued lack of growth: 

Although it is impossible to disentangle the extent of the influence of speculative activity and graft on the market’s boom up to 2011, most experts agree it made some impact, the lack of which is now keeping growth more subdued.

On a more positive note, artnet writes in the accompanying article that a number of experts “view the slowdown as reflective of more realistic expectations and pricing” – a phenomenon that could revitalize the market. The article quotes Nina Lippman, artnet specialist in contemporary Asian art, who writes that lowered prices are prompting “a reentry of buyers […] who were previously deterred by the inflated prices realised during 2010 and 2011”. McAndrew concludes in the report:

Despite the short-term challenges […] the development of regulation (and most importantly its enforcement), the promotion of transparency, and the continued progress on filling the gaps in the market’s infrastructure seem like the measures most likely to promote more stable growth in future by encouraging more buyers and sellers into the market . 

Michele Chan

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Related Topics: Chinese artart market watch, market reports, auctions, recession, art and investment 

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