Art market

Chinese privatise their auction scene

Rapid advances as new companies model their catalogues and conditions of sale on Western models


(Hong Kong)

China is the final frontier for the art trade. It is the classic “source” state, but, alone perhaps among “source” states, it has the potential to become a leading “market” state as well. At the same time, Asian buyers are beginning to dominate world auction markets. It should not therefore be surprising that fine art auction houses have sprung up in China in the last few years.

Chinese antiquities and contemporary art have been in great demand in recent years, and prices, especially for top quality ceramics and traditional paintings, remain high. This is not lost upon the policy-makers within the People’s Republic of China (PRC). It is naive to expect that China will somehow remain untouched by international currents in the cultural property area. Though art and cultural matters are hardly at the forefront of the development of modern China in the stupefyingly fast-paced capitalist boom of the 1990s, the state is certainly able to recognise the income-generating potential of this sector of the economy. As a Politburo member put it in 1994, cultural property matters “should be adapted to the new situation of the market economy and made to serve economic construction”.

The buying power of Asians in the world art market is well known, but Westerners tend not to appreciate the economic power of the nouveaux riches within China itself. The new Chinese privileged class of entrepreneurs—particularly in large cities, coastal regions and Special Economic Zones—are flaunting their Rolexes, Mercedes and, increasingly, their art. Though they can hardly be compared with the literati of past eras (many of the newly rich are acquiring art as a hedge against rampaging domestic inflation, or as investments as alternatives to the increasingly regulated property and securities markets), they have been responsible for the dramatic expansion of the PRC’s art and antiquities trade.

Within the last three years, Sotheby’s and Christie’s have been allowed to open representative offices in China. There is little likelihood that they will be allowed to conduct actual auctions there. To say that the PRC State Bureau of Cultural Relics (SBCR) and other cultural officials have been educated by the leading international auction houses is an understatement. The Chinese have picked their brains, left them dangling, and forged off on their own.

Following on from small regional auctions to sell confiscated smuggled goods, and the fiasco of the 1992 Beijing International Auction (see The Art Newspaper, No. 21, October 1992, p.27), several sophisticated fine art auction companies modelling themselves on the prominent international houses have now emerged in the larger cities. Some of these are merely extensions of State relics outlets that auction items from their stock, as well as some submitted on consignment. Some, like China Guardian Auctions (Guardian), a consortium of several state-owned enterprises, appear to be quasi-independent of the State, and sell only on consignment.

Guardian’s officers come from a variety of backgrounds including the State Council and the SBCR. One of Guardian’s vice-presidents is the daughter of a former General Secretary of the Chinese Communist Party. By their own admission, the principals behind Guardian have had little fine art experience, but they have now developed important overseas contacts and engaged foreign advisors. Guardian apparently unabashedly bases its operations, literature and catalogues (including some of its standard Conditions of Business) on those of the leading international houses. For example, Guardian, like Christie’s in Hong Kong, expressly excludes from its guarantee forgeries “in relation to Chinese paintings”, presumably reflecting the difficulties the trade has had in this regard.

After some initial reticence on the part of local Chinese consignors who were understandably concerned as to what might happen to their lots, the PRC auction houses have managed to attract a broad range of consignments including some significant private collections, and numerous foreign consignments. As an indication of the quality of some of the lots available, the Han Hai auction house in Beijing auctioned in 1995 a very rare Song Dynasty (960-1279 AD) scroll painting by the legendary poet Zhang Xian.

Many of the consigned pieces had been hidden away by their owners during the Cultural Revolution. Others, having been taken by the Red Guards, had been stored in huge government warehouses, and still carried identifying marks that allowed their owners to reclaim them years later.

It would seem that the mere existence of Western-style auction houses has resulted in a partial undermining of the PRC cultural property regime which heretofore prohibited sales other than those through designated state relics shops, prohibited private sales to foreigners and any private sales for a profit, and sanctioned state requisition.

The SBCR normally examines all lots intended to be sold. Auction houses like Guardian denote, by means of a printed general warning and stars placed next to lots in its catalogues, lots that will not be eligible for export certificates. Guardian takes the view, with which the SBCR apparently concurs, that what may happen to a lot after the sale is purely a matter for Chinese customs enforcement. This is of some significance, and a large number of lots—usually porcelain and paintings—are in fact prohibited exports under the current cultural relics regime. Chinese scroll paintings, for example, are notoriously easy to smuggle, and paintings purchased at recent auctions in China have reportedly now found their way into foreign collections.

At present, the SBCR does not allow the auction of unearthed relics or the collections of state-owned museums or archives. The SBCR sometimes insists that lots in auction catalogues, such as two letters written by Sun Yat-sen in Guardian’s November 1994 sale, be flagged with a notice to the effect that bids will only be taken on behalf of buyers who are state institutions or enterprises. Guardian assures consigners that if the reserve is not met in these cases, the lots will not be appropriated but will be returned to the consignor.

The above-mentioned eleventh-century scroll painting by Zhang Xian was another lot in respect of which potential buyers were limited to state-related institutions. In this case, competition between State owned museums was fierce, and after twenty-five bids, the lot was sold to the Palace Museum in Beijing for the equivalent of US$2.3 million, an amount described by the normally low-key Xinhua new agency as “a bloody lot of money”. It is believed to be the highest price ever paid for a traditional Chinese painting, if in fact that was the price actually paid.

Guardian’s spring 1995 auction included some 800 lots of which one-fifth were from overseas consignors. To date, unsold lots from foreign collections have been returned. Some suggest that this is ensured by consignors or consignees making a “donation” to various causes in China. Many consignors have sufficient business connections in the PRC, and have made donations of their own, so that expropriation will not be a risk.

The legal ramifications of this new auction activity are often unclear, and regulations specifically aimed at fine art auctions are still being developed. Recent indications are that the State will impose tougher controls over the booming auction industry, ostensibly to ensure cultural relics protection, but more likely to ensure a share of the large profits.

Guardian foresees a time in the near future when it will attract important antiquities that originated in China from overseas consignors. The PRC regime favours this, as there is reason to believe that some will be knocked down to Mainland buyers and will remain in China.

At least half the bidders at Guardian auctions are PRC citizens or enterprises. Foreign bidders are typically dealers or individuals (often from Hong Kong, Singapore and Taiwan), and are sometimes foreign companies or overseas Chinese who wish to donated the lots to the motherland for “public relations” purposes or otherwise keep them in China, for example, to adorn offices there.

Estimates for the lots are agreed upon on the basis of input from the SBCR experts and market experience (which often means the results of Sotheby’s and Christie’s sales outside China). In 1995 sales, however, it became apparent that some estimates were often drastically below market reality, with certain lots selling at ten times their estimates.

In Guardian’s initial auction in 1994 the two highest priced paintings, both of which sold for prices just under RMB2 million, were knocked down to Mainland buyers. Indeed, three-quarters of the lots sold were purchased by local Chinese. In its November 1994 sale Guardian sold an album of twelve paintings to a PRC buyer for the equivalent of US$600,000. Five of the top six lots were bought by Mainland Chinese buyers. The Beijing auctions in particular have been spirited, rollicking affairs held in hotel ballrooms. Some of the wealthy PRC buyers, openly admitting their lack of scholarship or expertise, have attended in the company of art experts.

By June 1995 the major PRC art auction houses had grossed over RMB200 million more than their income from the whole of 1994. Han Hai conducted a RMB105 million sale in April 1995, with a reported 93% of lots sold. The pace continues. In the October Beijing sales, Guardian offered approximately 200 items from overseas, including the Yeung Wing Tak collection of Zi Baishi paintings. Japanese investors started to make an appearance, particularly in the auctions of seals. Han Hai featured an astonishing 1,166 lots on offer, and its sales again approximated RMB105 million with 80% of the lots sold. A rare book consigned to Guardian by a Hong Kong collector was bought by another collector from Southeast Asia, apparently to be donated to China, for RMB1.43 million, the highest price ever paid for a single volume of a Chinese book.

Cultural internationalists have argued that in order to preserve their heritage, “source” nations should make judicious selections of their art and release excess and duplicative pieces into the trade with a view to combating black marketing and its attendant social problems. The time may well come, sooner than we think, when the PRC decides to ease its retentive embargo policies relating to cultural property and to broaden the licit market. When this happens, there is little doubt that the new domestic fine art auction industry will play a major role.

J. David Murphy of the Faculty of Law, University of Hong Kong, is the author of Plunder and Preservation: Cultural Property Law and Practice in the People’s Republic of China, published in 1995 by Oxford University Press. This report is based on his article, “Art Auctions in China” recently published in Art Antiquity and Law, the academic journal of the Institute of Art and Law.

o For the purposes of this article, $1=RMB8.3


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