The debut of the global art scene has changed the structure of international art trade. Whether it is from the size of the domestic markets, or from the global impacts of buyers, the global art market is more important than any other emerging art markets.
Over the years, Chinese art, with a strong foundation of private and institutional collections, is playing a crucial role in the global art market. However, it was not until the early 21st century that the domestic market in China arose as a significant art market and started to grow rapidly. The forces came from the sufficient supply in the auction market, and the strong demand of the increasing numbers of rich collectors and investors. From 2008 to 2011, the total turnover of the auction market increased by more than 500%, which plays a leading role in the art market of mainland China. On the contrary, the art markets were in a downturn as a result of economic crisis in many other countries. Thereafter, China became another major art trading center in the world after the United States.
This seemingly unstoppable momentum finally slowed down in 2012. The prices began to decline, and the trading volume shrank, which led to a sharp contraction of the gross sales in the market, and thereupon, a decline of China’s share in the global art market. Chinese auction market started to rebound in 2013, with an increase in the gross sales of every category compared to the previous year. China began to recover its share in the global market. During this growing period, yet, buyers became more cautious, and the prices moderated at the same time. Experts believe all these features indicate a more mature Chinese art market. The upper class in China, supply of artworks, as well as the trends of economic growth, all point to bright long-term growth prospects. Nevertheless, the art market in China is facing many challenges in the short term when the rules and regulations, infrastructures and other field are improving gradually.
Auction as the Growth Engine of the Art Market
The global art market is highly concentrated in that a few top auction houses are not only taking up a large portion of the market, but also achieving the highest prices. It is also the case in Mainland China, where the top 10 auction houses accounted for 58% of the sales in 2013. The auction houses are mainly located in Beijing-the center of the art market which own 54% of the market shares and in the meanwhile, attracts the largest number of the HNWIs (high-net-worth individual). In addition, the auction houses in the Chinese market are much more powerful and influential than in the West. The houses are playing a dominant role in cultivating art appreciation, in the pricing and public presentation of artworks because there is still lacking of channels for communication and sharing information about the quality and value of artworks. This is a big contrast to the western world where galleries, art experts, and agents together with auction houses are supporting a sophisticated system.
There were 382 auction houses for antiques and fine art in Mainland China in the end of 2013, the biggest number in the past 22 years, which has increased by 59% since 2009. The total sales of those auction houses were 6.17 billion dollars, with an increase of 22% compared to the previous year. Taking up over 20% of the global sales, the auction sales in China is ranked the second in the world, right after the U.S. (33%) and a bit higher than U.K (17%).
Although the total auction sales in 2013 is evidently higher than that of 2012, it is still far away from the record of 9.33 billion dollars in 2011, when the market reached its peak. After achieving more than five-fold increase in three consecutive years, the total sales fell sharply in 2012 with a decline of 50% in total sales and of 27% in the number of lots. The main reasons for that include the sharp drop in demand resulting from economic slowdown and credit constraints, as well as a reducing supply of high-quality and high-value artworks. Many art funds and individuals who collect as an investment become less involved in the market, which leads to a purchasing power decrease in some areas. The annual sales of the auction houses reach 2.33 billion dollars, increases by 42% than in the previous year. The sales in Hong Kong takes up to 70% of the sales overseas, once again consolidates its position as the trade center of China’s overseas art market. Christie’s and Sotheby’s are two leading houses in the overseas market of Chinese art, holding 68% of the market share (75% from sales in Hong Kong).
In general, the global sales of Chinese antiques and fine art are $8.51 billion in 2013 (70% from mainland China), which takes up 28% of the global auction sales.
Low-priced objects dominating the market
Although the media headlines are always about the arts with astronomical prices, the majority of sales in Chinese market are low-priced objects. In 2013, 95% of the final bid price in mainland China are lower than $780,000, while only less than 1% of them can reach $1.55 million or higher.
The global art market has continued to show signs of polarization since it started to shrink in 2009. The high-end market is doing good and acquiring more and more of the market share. On the other hand, the lower end of the art market is having lower and lower demand. Seeing the art market in China from this perspective, it is more balanced as its proportion of high-end objects are much smaller than that in the United States market. In terms of the volume of transactions, the final bid prices over 10 million RMB merely account for 0.1% of total turnover, which is similar to the situation in other countries.
In the case of turnover, however, high-end market only accounts for 14% share of the market, much lower than the 66% in U.S. and 54% in U.K. It shows that the scale of low-end market is small in 2013, and the final bid price is usually lower than that in other markets all over the world. Lower prices tend to be the common feature of new market, which is often a result of a smaller group of buyers. Yet, it also means Chinese buyers are more cautious in 2013. In contrast to the peak in 2011, there were 23 pieces (or sets) of works with a final bid price over $15.5 million in mainland China and Hong Kong, the number of works declined to 5 in 2012, and even 4 in 2013. The decreasing prices in the high-end market in China are big contrasts to those increasing prices in New York, where 50 pieces (or sets) of works were sold over the price of $10 millions in 2013.
The difference of market structure also reflects on the average prices. The average final bid price of every category in Mainland China is lower than that in other countries. The highest average prices appeared in the market of Hong Kong and U.K. in 2013, while the average prices in France and U.S. are also high than those in Mainland China.
Over the past few years, fine art outmatched antiques both in terms of the turnover and volume of transactions. In the category of fine art, post-war and contemporary art have the highest sales and keep making new records, which accounts for 46% of the total sale in the global market, and 59% of that in the U.S. market–the highest among all in 2013. In the Chinese market, the sales of fine art is also increasing in recent years, which has taken up 73% of the total sales in mainland China in 2013.
Even though high-priced lots keep showing up in the categories of oil painting and contemporary art in 2014, many of them are passed or sold with the lowest estimate. Even the mediocre works of the star artists are not selling well. It is only the masterpieces of the masters can be sold in high prices. In the next few years, the downturn in low-end market will continue, and the price gap between each end of the market will get even bigger.