Sunday, October 22, 2006

China's new millionaires see capital gain in art

China's new millionaires see capital gain in art

By Will Bennett - Financial Times

Published: September 29 2006 16:37 | Last updated: September 29 2006 16:37

China may still pay lip service to communism but it is fast emerging as a capitalist superpower and its rapidly growing millionaire class, already numbering more than 300,000, is starting to flex its muscles in the international art market.

Auction houses and dealers are watching the progress of China's new rich as well as their counterparts in India, another booming Asian economy, with self-interested fascination.

India's new millionaires are sending prices for their country's contemporary art soaring but it is the mainland Chinese who represent the most glittering prize for the likes of Sotheby's, Christie's, Bonhams, all among the world's leading dealers in Asian art.

Most of China's 1.3bn people are poor by western standards but economic reforms have created a breed of wealthy entrepreneurs some of whom are keen to buy art, either as an investment or to display their recently acquired riches.

In May and June, Christie's ran up more than $154m at its Hong Kong sales, the highest for a series of auctions held in Asia.

A few weeks earlier, Sotheby's sales in the former British colony, now a semi-autonomous part of China, brought in $108.5m with record prices for paintings, textiles and jewellery.

In March, Sotheby's New York Asian sales totalled $51.6m with a 14th-century Yuan dynasty jar becoming, at $4.7m, the most expensive Chinese work of art ever sold by the auction house in the US.

The market for contemporary Chinese art has never been stronger with Christie's Hong Kong sale totalling a record $39.1m.

Bidding from mainland China has been credited with driving these remarkable prices but the reality, as with most things in this vast, complex nation, is more complicated. The market for Asian art and, in particular, for Chinese works has always been international and many of today's biggest buyers are American and European collectors and dealers.

At Christie's Hong Kong sales, the piece that attracted headlines worldwide was a 14th-century Ming porcelain vase that sold for a record $10.2m. The buyer was Steve Wynn, the American gambling magnate, more usually known as a buyer of impressionist and Old Master paintings, who donated it to a museum in the Chinese port of Macau, where he is due to open a casino.

The most expensive lot at London's Asian art sales in July was a Yuan dynasty jar bought for $3.9m by London-based Giuseppe Eskenazi, the world's most important dealer in Chinese art.

That price was a fraction of the $27.7m that Eskenazi had paid for an even rarer Yuan dynasty jar at Christie's in London a year previously, a purchase for a European collector rather than a millionaire in Shanghai or Beijing.

A syndicate from mainland China had bid up to $18m for the jar but the final four contenders, who pushed the price into the stratosphere, were from elsewhere.

"The mainland Chinese have not had such an impact at the very, very top end of the market," says Eskenazi. "They are buying in the upper part of the middle market but not at the top where you need a sophistication that people acquire when they have been buying for a long time."

Although Asian art buyers are often Chinese, they are not necessarily from the People's Republic. Many of the high rollers are from Singapore, Taiwan and Hong Kong, which now have more than 170,000 millionaires between them.

One of the big spenders in London's summer sales was veteran Hong Kong dealer and collector Robert Chang and, when he won a hotly contested battle for a vase at Bonhams, his chief rival was a Taiwanese dealer.

Hong Kong's importance is undoubtedly growing but New York and London remain the biggest centres for the market. Their strength will be evident at the ninth annual Asian Art in London exhibition. Auction houses, dealers and museums will combine to stage the event from November 2-10 to promote the British capital's important role in the sector.

One of the key, and as yet unanswered, questions is whether western auction houses will hold sales in mainland China. Since the communist authorities legalised the private art market in 1992, almost 2,000 local auctioneers have set up businesses boasting, in 2004, a combined turnover of more than $1bn. Works of art made up about a quarter of this total and it is clearly a market with huge potential.

The problem is that although the People's Republic theoretically opened its doors to foreign competition almost two years ago, in order to fulfil its obligations as a member of the World Trade Organisation, government regulations, in effect, exclude outsiders.

Christie's discovered this last year when it formed an alliance with the Beijing-auction house Forever and held a successful $12.1m sale of modern and contemporary Chinese paintings. Within weeks, Forever's auction licence was withdrawn because the law bans joint ventures to sell cultural items with foreign companies. Christie's is still waiting for its local partner to resolve the situation with the authorities.

For the moment Sotheby's and Christie's find it easier to sell in the less bureaucratic atmosphere of Hong Kong. But, in spite of such setbacks, there is no doubt that China's new millionaires will play an increasingly important role in the market for Asian art.

"They will get there in the end," says Eskenazi. "There is so much cash available."

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