Healthy art market absorbs stock shock
Cultural marketplace not only can weather the recent share price turmoil, the forecast is for solid growth, experts tell
George Wong has been a collector for many years. The real estate mogul, who is in his 60s and whose net worth is about $1 billion, has gone from amassing albums and stamps as a youth to becoming a patron of the arts in the Asia-Pacific.
“I buy famous artists’ works,” he said. “I have Monet, Picasso, Lichtenstein and Degas. But I’d like to own a decent-sized Monet.”
A bigger Monet, perhaps a painting of a waterlily? “Yes,” he replied. “I would like a waterlily.”
There is a shelf of Star Wars memorabilia in Wong’s Beijing office and a metallic, bubble gum-pink machine gun on the wall behind his desk. “I like artwork. I started small, just collecting, collecting anything. It doesn’t matter if you buy art for investment, to appreciate it or to show off. As long as you’re involved.”
China is deeply involved in art, to the extent that it is a regular fixture in the world’s top three art markets in terms of value.
Its cohort of billionaires and their spending sprees is legendary, including $116 million dropped in one night at one auction on three paintings in May.
How involved they are during auction season, which begins this month and ends in November, remains to be seen. China’s stock market rout, which started in mid-June and has spiraled downward since, has hit the country’s superrich.
On July 8, Forbes said the 205 Chinese billionaires tracked by its Real-time Billionaires List had lost a total of $195 billion since the Shanghai Composite Index hit its peak on June 12.
Internet services giant Tencent’s stock, traded in Hong Kong, dropped 13 percent on July 8 and its chairman, Pony Ma, lost $1.2 billion on a single day. The list’s biggest loser, said Forbes, was the copper and cable entrepreneur Wang Wenyin, who lost $7.3 billion in the past month.
China’s richest man, Wang Jianlin, head of real estate giant Dalian Wanda, lost $6.5 billion in the past month, Forbes said, adding that he was still worth $32.3 billion and remained as Asia’s richest man. He was one of the three deep-pocketed Chinese collectors that night in May. He spent $20.4 million on Monet’s Le Bassin Aux Nympheas, Les Rosiers.
International auction houses are confident that China is capable of weathering the storm because it has enough wealth — and enough wealthy collectors — to absorb financial shocks.
President of Christie’s China, Cai Jinqing, said: “Like any market there are cycles and fluctuations. This is one of those things. Our strategy is geared toward the long term. We have to adapt.”
She said Chinese buyers increased their spending on global art by 47 percent in the first half of this year. Asian buyers accounted for three of the top five works sold at Sotheby’s New York Impressionist and Modern Art Evening Sale in May and 30 percent of that evening’s sales.
“China is an important consumer of art,” said Colin Sheaf, chairman of Bonhams UK and Bonhams Asia.
“At the moment the focus is very much on Chinese art, though I think we can expect to see some diversification as some collectors — especially of modern and contemporary art — broaden the scope of their interests to include works by some of the Western contemporary masters. Even if middlerange buyers in China become less active for a while, Bonhams has clients around the world who we are confident will continue to bid.”
A July report from Artnet said the market for Chinese fine art, not including foreign art, contracted by 30 percent. Sales in China, including Hong Kong, for the first six months amounted to $1.5 billion. For the first six months of 2014, sales were $2.2 billion. This could be linked to a slowdown in China’s gifting culture, experts say.
Giving art as gifts — known in China as elegant bribery — has been part of the domestic art market for decades, but it has declined due to the government’s ongoing anti-corruption campaign.
As a side note, Artnet also reported lower sales in other important art markets: France, Germany and the United Kingdom. Only the United States experienced a significant increase.
In 2003, sales at Christie’s Hong Kong were $98 million. By 2011, they had reached $836 million, said Dan Scott and Marc Hafliger, investment strategists at Credit Suisse and authors of the Artnet report.
“We really see China as an emerging market,” said Christie’s Cai who, like other industry experts, believes the Chinese art market is a work in progress.
“China has a long history of art creation and art collection. It is part of world civilization. The Chinese art market only really started in the 1990s. The first Chinese auction house was only founded in 1994. That was the starting point. … It is a rising giant and the future will see continued growth.”
China also presents a chance to innovate and experiment. “The China market is more willing to experience new things in terms of collectors and artists,” she said. “They want to know more about art and they want to experience it in a new way. … There is an emerging generation of very active female collectors in China. It’s not as simple as saying young people are buying young art. They are interested in special provenance and the interesting story behind it, if the piece belonged to an interesting collector.”
To this end auction houses are wooing Chinese buyers through experiences rather than catalogues alone. These initiatives also nurture allegiances and relationships with Chinese collectors who might otherwise be drawn to the two domestic auction behemoths, Poly and Guardian, a force in Chinese classical and contemporary art.
In May last year, Christie’s invited 18 new Chinese collectors to New York. The itinerary included a guided tour to the city’s Museum of Modern Art and VIP tickets to an art fair.
“The Chinese want to understand a specific piece of art and its value. They are getting more sophisticated. They want exchanges and interaction with the outside world,” said Cai.
There are parallels between China’s luxury market and its art market. Both have experienced stratospheric growth over a short period of time and a lull in activity does not necessarily point to an impending collapse or a loss of interest. “As the Chinese market has become more mature, collectors have refined their tastes and are now more discerning about what they want to buy and how much they are prepared to pay for them,” said Sheaf at Bonhams.
“This is normal with any maturing market.” Larry Warsh, a New York-based art collector and publisher with a specific focus on Chinese contemporary art, warned against ghettoizing the Chinese art market, saying it is like any other.
“The financial crisis in general works both ways. It’s not China specific. If you look at Dow drops in the past 10 or 15 years, the art market booms when the stock market is down. It creates a sense of insecurity and it creates a safe haven for commodities like gold and art. It also makes people need to sell quicker. Art is a great way to hold on to assets.”
He rejected the idea that the country’s financial problems will cause the Chinese to flee the art market and cause it to crash just as the Japanese did more than 25 years ago, when Japanese collectors smashed records at auctions and then exited the art market when their economy imploded. The art market is bigger than it was in 1990, he argued, and there is more money in a greater number of regions.
“Japan doesn’t have the scale of the Chinese art market, but there was a lot of bad buying in the ’80s. Wealth will support the Chinese art market and there is enough wealth to support the art available.”
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International auction houses such as Christies, say their sales are attracting more Chinese buyers.