Trend Watch: Inflation Fueling Chinese Art Market

Looking For Hedges, Wealthy Chinese Head To Art Auctions Looking To Buy

An association with the Ullens name should drive prices for top-quality works to sky-high levels on April 4 in Hong Kong

An association with the Ullens name should drive prices for top-quality works to sky-high levels on April 4 in Hong Kong (Image: Wang Guangyi: Mao Zedong: P2, 1988)

With the Sotheby’s spring auctions set to kick off in just a few weeks, with the highly anticipated sale of 106 works from the Ullens Collection and the Asian Contemporary Art auction on April 4, speculation is brewing on how large a presence mainland Chinese collectors will have, and how far above high estimates they’ll push prices. As Jing Daily wrote earlier this week, we expect to see the “repatriation” effect playing a larger role in buying habits next month than it did in 2010, since Chinese media reports that many Western collectors have been priced out of the market over the past two years, and more Chinese collectors are looking to keep Chinese contemporary art within China, a trend we have previously only seen in the traditional art and antique markets.

However, patriotism only takes Chinese buyers so far. Many, in not most, collectors are looking for a stable investment as well, and that’s where the Chinese buying predilection towards long-term value and stability kicks in. Inflation, which is starting to tame somewhat in China but is still causing skittish investors to look towards portable assets like gold, wine, art and even jade, should be a major factor in mainland Chinese buying at Sotheby’s and other auction houses this spring.

As inflation continues to bite and the Chinese currency increasingly “goes global,” more wealthy Chinese are concerned about yuan-denominated assets, so they’re diving in deep with portable investments — which is not a bad investment strategy. It’s certainly been good for the global auction market, which has taken about 18 months to get back on its feet. Perhaps that — along with the Chinese government’s gradual revaluation of the yuan — is why we’ve seen such an upsurge in new mainland Chinese collectors fighting to get their hands on every piece of blue chip Chinese contemporary art, every ancient Chinese antiquity, and every bottle of Petrus or Lafite up for grabs in Hong Kong or elsewhere — because they want to diversify their holdings while “gaining face” by buying art by well-known modern painters or antiquities from the reign of a popular emperor.

Considering inflation is driving prices up for all kinds of assets in China, it’s not surprising that wealthy individuals are spending so much on luxury goods, watches and auction prizes that will likely go up in value over time and outpace both inflation and yuan revaluation. What is surprising, however, is the speed at which Chinese collectors have become more discriminating.

That’s why the upcoming Ullens auction should blow its pre-sale estimate of US$17 million clear out of the water; it’s already been vetted by one of the most well-known and respected Western collectors of Chinese contemporary art. Guy Ullens has spent a good deal of his own money to establish the Ullens Center for Contemporary Art (UCCA) in Beijing and spent years amassing a well-curated collection of China’s best contemporary artists. That kind of “stamp of approval” doesn’t come very often, and as such, expect Chinese collectors (relatively established as well as first-timers) bidding forcefully on April 4.

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Art & Auction, Culture