Mainland Collectors Buying Top Lots For Long-Term Investment
Amid a drop in property prices, lower economic growth rates and a crackdown on art importers in mainland China, the upcoming Sotheby’s autumn auction series in Hong Kong will test the strength of Chinese demand for art, wine, watches and jewelry as both alternative investments and luxury goods in their own right. Along with blue-chip Chinese contemporary art, the series includes an array of auctions, from rare wines to modern and traditional Chinese art, antiques and more. In the contemporary Asian art auction alone, Sotheby’s expects to achieve over HK$130 million (US$16 million) in sales, with other popular segments like Fine Chinese Paintings estimated at HK$170 million (US$21.8 million).
With the attention of the global art auction world firmly on the Greater China market at the moment, observers are eager to see whether economic turbulence has dampened collector enthusiasm. However, considering the fundamental motivations of the seasoned Chinese buyer (hedging against inflation, art as an investment safe haven, amassing portable assets, diversifying away from cash, estate building) remain intact, the success of the Sotheby’s autumn auctions in general and Contemporary Asian Art auction in particular will likely hinge on supply rather than demand. For certain artists in segments like modern, classical and contemporary Chinese art, the number of available, high-quality works is becoming smaller, causing per-piece prices to continue rising regardless of more particular bidding by collectors.
Despite noting a six percent decline in contemporary art auction receipts between June 2011 and June 2012 to 860 million euros ($1.1 billion), Artprice recently said in a report that this is “nothing alarming” as the overall result remains the third-best in history. Accounting for 43 percent of sales, Asia currently has the world’s biggest demand for contemporary art, compared to just under 30 percent for Europe. Among Asian countries, China is the largest contemporary art market, making up 38.8 percent of auction revenue, up from third place only one year ago.
But contemporary Asian art sales haven’t been restricted to Asia. As François Curiel, president of Christie’s Asia, told the New York Times this summer that the slower turnover of the Asian art market in 2012 compared to Europe and North America indicates that Chinese collectors haven’t stopped buying art and antiques. Rather, they’re simply looking further afield for quality artwork and antiques as a growing number of collectors hang on to the top-quality works they’ve accumulated over the past several years. This is reflected in the impressive sales figures seen at Christie’s New York Asian Art Week last month, which racked up a total of US$44.7 million on the strength of bidding by globe-trotting Chinese collectors.
The increasingly global perspective of Chinese collectors is likely to be on show next week in London as well, when we may see Chinese buyers bid for works by artists like Zhang Xiaogang, perhaps adding to overseas collections in advance of the recently announced creation of Beijing’s freeport. As Artinfo wrote this week:
A key to the rise of the Chinese art market in London is that both Sotheby’s and Christie’s also recognize that Chinese collectors often want to shop outside of the country. Incorporating Chinese artists into their London and New York sales gives such collectors an opportunity to buy and store artworks abroad, where the government can’t show much “interest” in the assets.
Looking to feed demand closer to home, the October 7 contemporary Asian art auction in particular is sufficiently stocked with a selection of works by top historical artists who — if the last several auction seasons are any indication — remain highly prized among new Chinese collectors and global collectors alike. Among the standouts that we expect to be hotly contested among Chinese collectors are Zhang Xiaogang’s “Tiananmen No. 1,” Zeng Fanzhi’s “Fire,” and Yang Shaobin’s “Red No. 2.” Despite their multi-million-dollar pre-sale estimates, Chinese buyers continue to focus on domestic blue-chip artists, which are widely considered under-priced compared to Western heavyweights like Jeff Koons or Andy Warhol, whose work regularly sells at auction for tens of millions of dollars.
With many mainland Chinese collectors turning to art, antiques and wine as relative “safe havens” with which to diversify their cash holdings into portable assets and insulate them from inflation, we should see strong sales of blue-chip items (whether they be paintings or wines) at Sotheby’s Hong Kong. Regardless of overall economic data in China, the factors that have motivated most of China’s new collectors — who are, on the whole, far more pragmatic and portability-driven than many Western collectors — remain intact.
Broader regional and global macroeconomic fluctuations haven’t negatively impacted their appetite for quality, though, as Christie’s found out this spring, where HK$2.7 billion ($351.7 million) worth of Asian and Chinese art, wine and jewelry were sold, besting expectations and showing that demand for portable assets remains strong. As Jonathan Stone of Christie’s told Reuters in the wake of the auction series, “It doesn’t seem so much that the general economic uncertainties in various places have had that much impact on the sales.”
If this holds true, the upcoming autumn auctions may just surprise even the most jaded of auction watcher.
Conclusion: The appetite of Chinese collectors for more safe-haven investments in more sensitive economic times — added to the increasing scarcity of blue-chip art — should see prices for top historical lots rise in Hong Kong as well as London auctions.