The great jazz musician, Charlie Mingus, was asked once to explain his music. He replied, “If you don’t feel it, I can’t help you.” In the case of economic liquidity, you only feel it when you don’t have it. Lack of liquidity rather than a problem of solvency is what has upset the East Asian financial markets in recent months. It has been caused more by weaknesses in the governance of the private sector and exchange-rate policies than by public-sector deficit and profligacy. There is also danger in fixed exchange-anchors that are not consistent with the realities of the economy and lead to a loss of competitiveness and to an inducement to excessive borrowing abroad.
Yet amidst the regional economic turmoil, three well educated, liquid financial systems have survived better than most. Taiwan, Hong Kong and Singapore have got the fundamentals right and appear to be riding out the storm, and mainland China’s closed economy, with its huge foreign currency reserves, is seemingly immune.
The stock markets in the three “Tigers” have throughout 1997 suffered downturns, but over the year Taiwan’s stock market has recovered better than the Hang Seng, which in turn has outperformed the Singapore market.
Of the four “Greater Chinese” commercial centres, Shanghai and mainland China are the least immune to the medium-term effects of the economic crisis. According to Gordon Barrass, international advisor and a China watcher at Coopers and Lybrand, “It will be a long time before you see Shanghai develop to the level of Hong Kong. At least a decade will pass before they even begin to compete.” However, Mr Barrass does agree that “there are people in China who are making good money, some of it in Hong Kong, and disposable income is high in some places. But there is a big difference between this level of expenditure on luxuries and the great sums being spent on art in Hong Kong, Taiwan and Singapore.”
As for two of mainland China’s main export markets, Korea and Japan, these are still seeking that elusive recovery.
Where does this leave the Asian art market? There is a correlation between the stock market and the art market, but as was demonstrated by the time-lag dividing the major stock market collapse of the late Eighties and the art market collapse two to three years later, it is not indivisibly linked. In pure investment terms, an astute operator might invest up to 5% of his portfolio in art, a percentage which might increase as the overseas equities market became less attractive.
There are a number of other factors which contribute to a healthy art market, in addition to the overriding factor of a buoyant economy. A successful market must be able to achieve international prices for various categories of art. Hong Kong is certainly the regional, and in some departments—Imperial-ware ceramics, for example—the international market place for Oriental art.
Taipei has the strongest market for a limited number of commodities, such as twentieth-century Chinese oil painting and even contemporary Chinese painting. According to Colin Sheaf, director of Christie’s Chinese department, Taiwanese buyers have been as active if not more active than Hong Kong collectors on the international stage since 1991.
But it is important to make the distinction between a market’s capacity to compete at the highest levels, as Taiwan clearly can, and the capacity of a region to attract those international buyers to its market base. The table (see box) shows that the three “Tigers” share liquid economies and that Hong Kong and Shanghai actively encourage foreign involvement in the cultural field. Taipei, on the other hand, despite attempts to internationalise its art fair, remains a hostile city for the foreign dealer. There is an import duty (GST) of 3% on imports to Singapore which make it increasingly unattractive to buyers and sellers, but perhaps it is the legal restrictions operating in each centre apart from Hong Kong, which decide in favour of that city.
Both Taiwan and mainland China forbid the export of pre-1795 works of art, although jadeite and certain paintings can be legally exported from the mainland into Hong Kong for sale. This does not hamper the market in Hong Kong, however, because as Colin Sheaf explained, nearly all the Oriental works of art are brought to auction in Hong Kong from overseas. The existence of a free port Hong Kong is guaranteed by statute for the next fifty years.
In the lower half of the table, covering secondary indicators of a viable art market centre, Taipei is in pole position in all but one of the categories, failing only to be a cosmopolitan and attractive environment. The island’s public support and promotion of its own culture is evidenced by its substantial showing at last year’s Biennial in Venice. The tour of “Treasures of the National Palace Museum” to the Metropolitan Museum of Art in New York (The Art Newspaper, No.68, March 1997, pp.24-25) was the best attended exhibition of 1996. Taipei’s museums regularly have good exhibition programmes, and the city has the largest concentration of commercial galleries of any of the other three. Some of the galleries like Lung Men, Lin and Keng, Pierre, Elegance and Dimensions are regional market leaders, and the island’s group of collectors, centred around the Ching Wan Society, are as passionate as their rivals in Hong Kong’s Min Chiu Society, although many are members of both societies. The cultural background in Taipei is more advanced and sophisticated than elsewhere in Asia, with recent exhibitions at the National Palace Museum and the National History Museum attracting over half a million visitors each.
If Taiwan is emerging as greatest source of demand for Chinese works of art, surely the major factors preventing it from taking over from Hong Kong as the regional centre, or even an international centre for the sale of art, are the restrictive export law, hostility to overseas competition and the lack of an attractive environment. The first can be changed by act of law and the second by greater regulation of the industry from the Republic of China Galleries Association. The third element, a pleasant and harmonious environment, looks likely never to happen.
Rumours abound in Hong Kong as to why members of the Min Chiu Society of collectors have emigrated. It must be said that the current accord between Hong Kong and China is subject to the whim of the government in Beijing. In addition, Hong Kong-based galleries run the risk of becoming marginalised as New York and European dealers go straight to the source on the mainland. This problem is compounded by the astronomical costs of locating a business in Hong Kong. Office occupancy rates in the former Crown colony are an average of $10 (£6) a square foot, the highest in the world, almost twice as much as those in Singapore and substantially more than those in Shanghai and Taipei.
Colin Sheaf believes that “Taiwan and Hong Kong will survive very comfortably but the Singapore region will take a long time to come back.” Almost certainly this will be the case, but both Shanghai in perhaps ten to fifteen years and Taipei much sooner could steal Hong Kong’s thunder.
Ingredients for a successful art market centre
(1 is the most competitive and 4 the least competitive)
Taipei Singapore Hong Shanghai Kong
International prices achieved 2 3 1 4
Indigenous supply and demand 1 3 2 4
Liquidity 1 1 1 4
Int’l competition encouraged 4 3 1 2
Favourable laws 4 2 1 4
Public support/promotion of culture 1 3 2 4
Cultural infrastructure 1 3 4 2
Cosmopolitan/attractive environment 4 2 1 3
Culturally educated population 1 3 2 3
Healthy stock market 1 3 2 4
Total 20 26 17 34
What the Hong Kong dealers say
Alice Yuan Piccus, private consultant and director of Marlborough Fine Arts insists that blue chip artists such as Chen Yi Fei, are continuing to sell even in this market, but that there has been a slowdown in volume. “We view this as a time to make relationships and get to know collectors.” Interestingly enough, Ms Piccus notes that she is not seeing much work being put back into the market. “The big collectors are holding onto their stock until the market improves. Rather, I am receiving more queries from bargain hunters than from sellers.”
Stephen McGuinness of Plum Blossoms Gallery which deals in contemporary Chinese art, is surprised at the increased volume in business since the start of the Chinese New Year. “After Indonesia bottomed out in early January, people panicked, but January is typically a slow period in the art market anyway.” Mr McGuinness suggests that the recent upturn since early February might be due to the fact that people tend to spend money when they get out of the market and find themselves suddenly liquid. While he doubts this will be a good year for Asia, he is not yet ready to hold a “sale”, which was the case on the eve of the US invasion of Iraq.
Johnson Chang of Hanart another longtime dealer, admits that with Hong Kong overheads, “I panic every month”, but sales this month though have been up despite the “bad mood.” Johnson’s clients tend to be the younger, second generation rich Hong Kongers and well-to-do expats, who, he suggests, might put the purchase of “more adventurous art on hold until the bad mood passes.”
Grace Wu Bruce the pre-eminent dealer in hardwood sixteenth- and seventeenth-century furniture, suggests that similar results are being found in the high end of the antiques market. She stresses that the recent publication of their current catalogue has a had a very strong response. Since the end of January “I have been swamped with calls from collectors in Hong Kong, Taiwan and worldwide. The Chinese art market is alive and well.”
Anthony Lin, Deputy Chairman of Christie’s Asia The auctions in Hong Kong attract buyers from throughout the region. Mr Lin already sees a marked increase in consignments in jewellery and jadeite. “We have noticed an increase—in both value and number of lots—in consignments from Thailand and Indonesia, particularly in the jewellery sector.” The auction house plans to proceed cautiously this year. Lots will be carefully selected to reflect strong demand and interest and pricing will be on the conservative side. Mr Lin is optimistic, as he feels that “good art is often used as a hedge in international markets.” While no one can predict the results of the upcoming sales, many feel that in this city of punters, the bargain hunters are sure to be out in full force.