ONE of the common assumptions about the art market in 2009 was that the stunning success of the three-day Yves Saint Laurent/Pierre Bergé sale in Paris—the highest grossing single-owner sale ever—would allow France to reclaim its position as the third-biggest art market in the world after America and Britain. It didn’t.
Clare McAndrew, a Dublin-based analyst of art-market statistics and the founder of Arts Economics, was the first to prove categorically that France’s century-long pre-eminence in the art world had been usurped by China. That was in 2007, and many presumed it was no more than a blip. But Ms McAndrew’s most recent report, the latest in a series commissioned by The European Fine Art Foundation (TEFAF) and published to coincide with the start of TEFAF’s Maastricht art fair on March 12th, proves categorically that China’s art market is getting bigger all the time.
In 2008, despite the start of the art-market’s wobbles, China was able to maintain the same strong position it had achieved for the first time the previous year; 9% of worldwide sales of art against France’s 6%.
But in 2009, when the global art market shrunk by more than a third to €31.3 billion ($43.5 billion), compared with €48.1 billion at its peak two years earlier, the Chinese art market bucked the trend. Sales in mainland China and Hong Kong reached a record high of €4.2 billion, up from €3.8 billion in 2008, boosting China’s share of the world art market that year to 14%, its highest share ever.
The figures mask other developments, which will be of particular concern to the world’s two leading auction houses, Christie’s and Sotheby’s, who have pursued different policies with regard to China. Selling art at auction makes up about 45% of the art trade by value, according to Ms McAndrew, and is the basis for a considerable amount of analysis of the art market because much auction-sale data is publicly available. However, Ms MacAndrew who polled some 4,000 auction houses and 5,000 dealers worldwide as part of her research, has uncovered some details that present a slightly different picture.
Auction houses were more badly affected by the market downturn than dealers, with sales in 2009 dropping by 46% from the peak two years earlier. Sotheby’s, which released its 2009 year-end figures on March 1st, saw sales revenues fall by 30% in just one year, with auction revenues falling by 54%. It posted a net loss of $6.5m, its first in seven years. Only significant cost-cutting and a one-off change in its tax position stopped that loss from being bigger than it was.
China’s burgeoning position in the world art trade was accompanied by a smaller, yet similar, rise by France. But whereas France’s position can be attributed to the success of a single exceptional auction and cannot be sustained, China’s growth is likely to continue. Moreover its expanding share of the market is coming at the expense of America and Britain, the headquarters of Sotheby’s and Christie’s respectively.
Hong Kong has long dominated the Chinese art trade in terms of value, but this is also changing. In 2008, Ms McAndrew reports, auction sales in Hong Kong represented 43% of sales by value, with Beijing following a surprisingly close second with 40%. Several of the Chinese auction houses Ms McAndrew polled reported that 2009 was their best year ever, and that they expected 2010 to surpass that.
But operating in China is not easy. One notable feature of the auction market there is the high number of buy-ins (lots that are not sold). In 2008, despite the boom, the figure was 49%. Although it fell to 41% in 2009, the annual average for the past six years is still around 43%.
Furthermore, the Chinese auction market suffers particularly badly from a large numbers of fakes and forgeries. A loophole in the 1996 Auction Law in China means that buyers have no recourse if they purchase a lot that turns out to be inauthentic.
A third problem is the short lifespan of many Chinese auction houses, which can best be described as here today, gone tomorrow. Several thousand auctioneers operate through Hong Kong and mainland China, but only 55 in Hong Kong and 245 on the mainland are actually authorised, and even this figure fluctuates, according to Ms McAndrew. In 2008, for example, there were 260 auction houses in mainland China and 25 were added in 2009, but an even greater number had their licenses revoked, leaving 245. The biggest are Beijing Poly International Auction, a subsidiary of the Chinese army, and China Guardian Auctions, founded by Yannan Wang, a daughter of a former Chinese leader, Zhao Ziyang, who died under house arrest around five years ago.
Sotheby’s has taken the view that business with China is better conducted from the sanctity of Hong Kong. Christie’s, the region’s leading auctioneer, has been braver. Since 2005 it has had a licensing agreement with Forever International Auction Company in Beijing. But the day may not be far off when the Chinese are ready to acquire a big Western auction house for themselves.
VIA The Economist
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