Where there is wealth, there is art. Whether it’s a means of diversifying assets – tying up a few million in a Picasso that is less likely to depreciate in value than the soundest real estate – a goodwill gesture to the community, or just something pretty to hang on the wall, a sizeable proportion of the world’s super-rich spend big on rare artifacts.
China is no exception. More than 300,000 Chinese are thought to be in the US$1 million bracket and this fast-growing group is collectively responsible for US$530 billion in assets.
Little wonder spending at domestic auctions has soared from just US$79 million in 2001 to more than US$1.6 billion in 2005, according to the China Association of Auctioneers.
"People are buying, reselling three months later and, amazingly, the market has been booming so much they have made an immediate profit. This used to be unheard of in the art market," said Philip Hoffman, chief executive of the Fine Art Fund, a London-based art investment group that plans to introduce a specialist Asian fund this autumn.
International auction houses Christie’s and Sotheby’s both reported strong spring sales in Hong Kong, taking US$154 million and US$108.5 million respectively. New records were set for classical works including imperial Chinese ceramics, pottery, paintings and textiles, which have long been popular with Asian collectors.
There was also strong growth in the contemporary art market, suggesting a new appetite among collectors for modern pieces. Sotheby’s took US$16.9 million in its Chinese contemporary art sale. Christies’s racked up more than US$39.1 million for contemporary Asian works. Both are house records.
But it would be wrong to describe this as a purely Chinese-driven phenomenon.
"The newly wealthy in China have injected a new level of competition and prices are being pushed up, but they are not the dominant group by any means," said Henry Howard-Sneyd, managing director of Sotheby’s Asia.
However, they can perhaps claim indirect responsibility for the boom. Growing interest in Chinese art among Western collectors may be a result of the country’s emergence as an economic powerhouse as much as anything else.
"China is on the front page of every newspaper all around the world. If you have made a lot of money and are thinking what to buy, then China is always in your face. We have seen this effect most strongly in the contemporary art field."
This theory of international appeal is borne out in the statistics. Sotheby’s recorded sales of US$13.2 at its inaugural auction of Chinese-Asian art in New York at the end of March. Leading the way was Zhang Xiaogang’s Bloodline Series: Comrade No. 120, which went for US$979,200, a record for the artist.
Indeed, it was foreign interest that kick-started the Chinese contemporary art market in the 1980s and 1990s when domestic collectors were few and far between. Foreign buyers were so dominant that anyone in need of a Zhang work circa 1995 would be wasting their time searching in China, according to Howard-Sneyd.
"Ten years ago it was just a few foreigners who were doing business in China," recalled Lorenz Helbling, who has been running the influential contemporary gallery ShanghArt in Shanghai for more than a decade. "Now we have more and more collectors acting for museums who come specifically to look for art. And there is certainly more local interest."
The Chinese may not have been the ones who nurtured their contemporary art market, but they look set to play a major role in its continued growth.
"I certainly think that interest in Chinese art is going to grow as mainland China becomes more and more wealthy, and this is usually accompanied by an increase in prices," said Howard-Sneyd. "In that sense, I am fairly bullish about the market in the medium term."
Development is likely to follow a similar path to the West, with museums coming in and making big purchases in order to build up art in the community and spawning new waves of artists and collectors. But the market needs time to grow.
"China doesn’t have many artists, museums or collectors," Helbling said. "The art world used to be just Europe, the US and Japan. Now the industry is more global and China is becoming a part of it."
For Hoffman’s Fine Art Fund, greater interest means more investors. Individual investment in the group’s existing Western art fund ranges from US$250,000 to US$20 million. For works held for 12-15 months, the average sale generates almost a 50% premium on the original price.
Anyone looking to join the Asian fund will have to stump up a minimum US$100,000 and Hoffman hopes for returns of 10-12% a year – "like solid real estate" – focusing on early modern and late Chinese contemporary art.
The strategy employed is much like that of any investment fund: identify a target that is competitively priced, get in early and wait for the value to rise.
Hoffman points to Ed Ruscha as a classic success story. Prices for his work jumped from US$50,000 to US$500,000 and then past the US$1 million mark in the space of a few years.
"Ruscha is seen as the hero of the west coast US art scene and American people want to buy American art," he said. "The same thing is going to happen in China. Someone will emerge as the hero of the art scene and their prices will just go up."
Picking a winner isn’t easy, though. The difference between professional collectors like Hoffman and a first-time buyer looking to uncover the big thing is that Hoffman has a team of experts to help him out.
"It’s a bit like looking for a needle in a haystack," he said. "Unless you have people who can negotiate the haystack, you’ll be in trouble."