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THE ART NEWSPAPER, No. 235, MAY 20122 China Focus News

is based on data from the min-istry of commerce, but such di-vergent figures do not inspireconfidence.

A better way to understand theChinese market and its statisticsis to look at the individual worksof art sold at auctions. Many ofthe figures are built on false salesand crooked hammer prices.Even in Western auction housesthere are have been cases ofChinese bidders who have notpaid for their purchases, as with

the Qianlong dynasty porcelainvase auctioned at Bainbridgesfor a world record £51.6m (in-cluding buyer’s premium; £43mwithout) in 2010.

Defaulting is frequent inChina: according to the CAA re-port for 2010, there were 408 lotsthat sold for at least Rmb1bn($146m), but only 237 of themwere actually paid for (non-pay-ments in 2010 representedRmb55bn, $8.7bn).

What is more, there is no short-age of forgeries being sold at auc-

tion, with extraordinary pricesbeing reported.

Let us take a closer look atArtron’s top ten Chinese olderworks of art sold in 2011.Number one on the list was a sup-posedly Yuan dynasty blue andwhite vase, sold for Rmb685.4m($108.7m) by a small auctionhouse based in Macau. The samecompany also sold a purportedly18th-century imperial porcelain(ranked number nine on Artron’slist) for Rmb191.4m ($30.4m).Both the authenticity of these

pieces and their hammer priceshave been doubted in China and abroad.

At number seven was a jadechair described as Han dynasty,sold for Rmb220m ($34.9m) at aminor auction house in Beijing.It turned out to be a modern fakeand has never been paid for.

Meanwhile, a nude attributedto Xu Beihong (1895-1953) wassold for Rmb72.8m ($20.6m)—number 26 in Artprice’s Top 100for 2011—and was later exposedas a student’s work.

These are just a few examplesto show how difficult it is to seethe true picture. While we can-not simply ignore or discard thedata, until we have a better graspof the extent of bad practiceamong Chinese auction houses,it would be wise to exercise cau-tion and not put too much faithin numbers. !Wang Tao The writer is a senior lecturer inChinese archaeology at the School ofOriental and African Studies,University of London

Left to right: jade chair, described as Han dynasty, sold for $34.9m but is a modern fake; Yuan dynasty blue and white vase went for $108.7m and an 18th-century imperialporcelain vase sold for $30.4m, but the authenticity of both pieces is doubted; nude attributed to Xu Beihong sold for $20.6m, and was later revealed to be a student’s work

The dodgy numbers game

CONTINUED FROM P1

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EDITORIAL STAFF AND CONTRIBUTORSLONDON-BASEDEditor Jane Morris Deputy editor JavierPes Literary editor Donald LeeConservation and research editor EmilySharpe Production editor Ria HopkinsonAssistant editor (art market) Riah PryorAssistant editor (exhibitions) JuliaMichalska Editors-at-large GeorginaAdam (art market), Gareth Harris, CristinaRuiz Design Emma Goodman ListingsJames Hobbs, Toby Skeggs Copy editingAnne-Marie Conway, Will Duberley, BenLuke, Iain Millar, Anny Shaw, SimonStephens Picture research KatherineHardy Editorial researcher ErmannoRivettiNEW YORK-BASEDNews and art market editor CharlotteBurns Website editor and New York edito-rial manager Helen Stoilas Editorial assis-tant Eric Magnuson Contributor ChristianViveros-Fauné Contributing editor AndrásSzántóCORRESPONDENTS (INTERNATIONAL)Martin Bailey, Louisa Buck, RogerBevan, Iain Millar, Anny Shaw, TobySkeggs (UK); David D’Arcy, JudithDobrzynski, Anthony Haden-Guest,Brook Mason, Charmaine Picard, LindaYablonsky (US); Martha Lufkin (US legal correspondent); Elizabeth Fortescue(Australia); Chris Gill, Katie Hunt, LisaMovius, Alexandra Seno, Iona Whittaker,Luo Yi (China); Lauren Gelfond Feldinger(Israel); Franco Fanelli, Federico CastelliGattinara, Alessandro Martini, Edek Osser(Italy); Roxana Azimi, Claudia Barbieri,Jean-Christophe Castelain (France);Richard Unwin (Eastern Europe); Cristina Carrillo de Albornoz, NicolasSmirnoff (Spain); Clemens Bomsdorf(Scandinavia/Germany)DIRECTORS AND PUBLISHING Publisher Umberto Allemandi Chief executive Anna Somers Cocks Managingdirector James Knox Associate publisherBen Tomlinson Finance directorAlessandro Iobbi Business developmentexecutive Stephanie Ollivier Advertisingexecutive (UK) Elsa Ravazzolo, KathBoon Head of sales (US) Caitlin MillerWebmaster Eyal Lavi Office administratorBelinda Seppings Ad production DanielaHathawayCONTACT USIn the UK: 70 South Lambeth Road,London SW8 1RLTel: +44 (0) 203 416 9000 Fax:+44 (0)207 735 3322Email:londonoffice@theartnewspaper.comIn the US: 594 Broadway, Suite 406, NewYork, NY 10012Tel: +1 212 343 0727 Fax: +1 212 965 5367 Email: nyoffice@theartnewspaper.comwebsite: www.theartnewspaper.com All Americas subscription enquiries: Tel: +1 888 475 5993All other subscription enquiries: Tel: +44 (0)1795 414 863HOW TO SUBSCRIBE The Art Newspaper comes out 11 times ayear (not in August) In the Americas Please pay $115 by cheque or credit card,made out to “The Art Newspaper”, andsend to:The Subscription Department,FULCO, PO Box 3000, Denville, NJ07834-9776. Call toll-free: +1 888 4755993. Tel: +1 973 627 2427. Fax: +1 973627 5872All other territories:UK: Please pay £85 by credit card or bycheque made out to “The Art Newspaper”Continental Europe: Please pay !110 bycredit card or cheque made out to “TheArt Newspaper”In the rest of the world: Please pay £90 bycredit card or cheque made out to “TheArt Newspaper”and send to: The Art Newspaper,McGowan House, 10 Waterside Way,Northampton NN4 7XD. Tel: +44 (0)844322 1752 (UK), +44 (0)1604 251495(from outside the UK). Fax: +44 (0)1604251031Email: theartnewspaper@dsbnet.co.ukSubscribe online at www.theartnewspa-per.com/subscribeDISTRIBUTIONInternational Retail: Seymour Distribution Ltd, 2 EastPoultry Avenue, London EC1A 9PTTel: +44 (0)20 7429 4000Email: info@seymour.co.ukSpecialist retail: Central Books, 99 Wallis Road, London E9 5LNTel: +44 (0)845 458 9925 TO ADVERTISE, please contact:Americas Caitlin Miller. Tel. +1 212 3430727, fax +1 212 965 5367 France,Belgium, Switzerland Dominique Thomas.Tel. +33 1 48 42 90 04, fax +33 1 48 4290 01 Italy Cinzia Fattori. Tel. +39 011819 9119, fax +39 011 819 3090 UK andrest of world Tel. +44 (0)20 34163466/3479

MAINLAND CHINA. Art invest-ment is taking root in China, withmillions of dollars flowing fromthe country’s newly wealthy in-to art funds and other art relatedproducts, despite questions overthe budding industry’s regulation and sustainability.Government limits on real estateand a volatile local stock markethave made traditional invest-ments less appealing, and therapid growth of China’s art mar-ket since 2008 has attracted theinterest of investors keen to di-versify their portfolios.

The consultancy Deloitte es-timates that the Chinese art fundand art investment trust marketwas worth $320m by June 2011,around a third of the amount inart funds globally, and a further$300m was being raised inChina. An article in the Chinesepublication Eastmoney in

Art investment funds prove popular in ChinaBut can they succeed in such an opaque and bureaucratic art market?

December, however, suggeststhe market could be much larg-er. It estimates that the country’stop 20 art funds manageRmb5.6bn ($900m). Major play-ers include China MinshengBanking Group, Beijing Ya YingTong and Beijing Poly ArtInvestment Management, part ofthe Poly conglomerate which al-so owns China’s largest auctionhouse.

The New York-based MotifArt Group is one of the few over-seas companies to have dipped atoe into the market. It launched athree-year fund in conjunctionwith China Merchants Bank inNovember last year after raisingRmb100m ($16m) from in-vestors. It targets late 19th- and20th-century Chinese ink andbrush paintings and currentlyowns 34 pieces of art. To date ithas seen double digit returns.

Despite clear investor enthusi-asm it is still too early to tellwhether Chinese art funds cansucceed in a sector that hastripped up many experiencedplayers in the US and Europe.

Returns appear impressive but re-al performance can only be as-sessed once all the works havebeen sold, says Adriano Picinatidi Torcello, a director at Deloittein Luxembourg. Most of thefunds have existed for less thantwo years and have no experienceof managing a down market.

Picinati di Torcello adds thatwhile prospects for growth in theChinese art market are good,there is a risk that China’s artfund industry could experience aboom and bust similar to that wit-nessed in India between 2005 and2008, when regulators crackeddown on unregistered art funds.Many of China’s art funds are op-erated by lightly regulated trustcompanies: Chinese financial in-stitutions that combine privateequity, asset management andbanking. Trusts do not take on therisk of an investment but act asmiddlemen channelling funds,and they have recently come un-der increased government scruti-ny over shadow lending to prop-erty projects.

Chinese art funds are alsoheavily reliant on auction housesto buy their holdings and realisetheir investments. They are

Many of China’sart funds are operatedby lightly regulatedtrust companies”“

Fake

Doubt

Doubt

Fake

rumoured to be behind some re-cent auction records such as thepurchase of ink painting and cal-ligraphy scrolls by Qi Baishi for$65m at an auction held by ChinaGuardian in Beijing last May.However, inflated prices andfake bids are said to be rife inChinese auctions and pose a po-tential risk for fund managers.

Terry Huang, Motif’s manag-ing partner and founder, hasfound operating in China’sopaque and bureaucratic marketdifficult, and financial practiceswere often not up to internation-al standards. Taiwan-bornHuang now plans to offer man-agement services for investors inChina. “If the government wantsto secure a future for art invest-ment in China, they have to reg-ulate the art market more closely,” he says. ! Katie Hunt

Chinese auction houses are not responsible for authenticationBEIJING/MAINLAND CHINA.Despite the unreliability of thedata emanating from the Chinesemarket, it is almost certainly truethat, in terms of turnover, four ofthe top ten auction houses in theworld are now Beijing compa-nies. These are PolyInternational, ChinaGuardian, Beijing Council andBeijing Hanhai.

In mainland China, there arenearly 300 auction houses li-censed to sell works of art (thenumber of those that can auctionpre-1919 works of art is small-er). They are mostly owned byprivate shareholders and com-panies, though some still comeunder state-owned antiquesshops, book shops or publishingcompanies, such as BeijingHanhai, Beijing Rongbao andShanghai Duoyunxuan. Thecomplex structure of theChinese auction houses, com-bined with a lack of informationabout them, means thatWesterners often find it difficult

to understand how they work. In2008, the School of Oriental andAfrican Studies (SOAS),University of London, started toresearch the Chinese art market,in particular the auction houses.The project identified severalproblems: issues of credit andgovernment regulations; thelack of transparency; the largequantities of fakes sold at auc-tion; poor management and askills shortage.

The legal underpinnings of theChinese auction market are theAuction Law and AntiquitiesLaw passed by the Congress andthe State Council; the Legislationfor the Trade and Management ofWorks of Art issued by the min-istry of culture; and theProvisional Legislation forImport and Export of Works ofArt, also from the ministry of cul-ture and customs. The ministry ofcommerce recently published itsrules relating to the auction of artand antiques, which will serve asthe government guidelines.

From the beginning, Chineseart auctions have had to dealwith a dilemma. On the onehand, the industry is heavily reg-ulated, with all auction housesneeding a classified licence(certain types of works of art arerestricted and can only be soldby those with an A-licence), andall pre-1919 lots have to be sub-mitted to the StateAdministration of CulturalHeritage for approval prior tosale. On the other hand, the rulesare often bent in favour of peo-ple with connections, and some-times appear ambiguous.

The problem of fakes is cen-tral to the art market, yet theAuction Law states that auctionhouses are not responsible forany fakes they might sell. A re-lated question is that of authen-tication. While many “experts”provide authentication for“wrong” goods, the officialState Committee forAuthentication does not offerits services to any auction hous-

es or to private collectors. Defaulting is another serious

blight, as it forces auction hous-es to insist on a hefty deposit be-fore allowing a client to bid.

One solution would be to im-prove the management system.In July 2011, SOAS organised aweek-long seminar for seniormanagers of Chinese auctionhouses. Working together withthe Chinese Association forAuctioneers, the seminar cov-ered general topics as well asspecific issues relating to the UKauction business, and guest lec-turers from Sotheby’s,Christie’s, Bonhams andSotheby’s Institute of Art wereinvited. Questions asked byChinese delegates included:“How do Western governmentsregulate the art/auction market?Do Western auction houses offerguarantees for the goods theysell? What is the role of special-ists in the authentication andevaluation of works of art?”Western auctioneers asked:

“Why can’t we British auctionhouses set up business inChina?”

Western auction houses arefrustrated by Chinese govern-ment restrictions that preventthem from setting up on themainland. Chinese auction hous-es, on the other hand, are begin-ning to take advantage of the freemarkets of Europe and Americaand are sending their agents toeye up consignments in SanFrancisco, New York, Londonand Paris. Poly International andChina Guardian have recently setup offices in New York.

Currently, nearly 40% of highquality objects appearing in ma-jor Chinese auction sales comefrom abroad. As China becomesa dominant economic force in theworld, we can expect to see theChinese organisations attempt-ing to enter the international mar-ket and eventually holding auc-tions in the West. It could besooner than we think. !Wang Tao

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