China has displaced the U.K. to become the world’s second largest art market after the U.S., according to a report on the global art market in 2010 commissioned by the European Fine Art Foundation and published to coincide with its Maastricht arts and antiques fair, the art dealing world’s annual trade show that opens at the end of this week. Given the pace of economic growth that China has enjoyed in recent years, regardless of the global financial crisis in 2008 (when China displaced France as the third largest art market), and the consequent growth of a cadre of newly rich potential purchasers, that is perhaps no great surprise. Something similar happened in Japan at its equivalent phase of growth in the 1980s. Older hands will remember Yasuo Goto of the Yasuda Fire and Marine Insurance Company paying $40 million at auction for a Van Gogh in 1987, a price that more than tripled the then world record for a work of art.
What intrigues us is whether the scale of China’s newly rich buying art will turn fine art into a structured alternative-investment category in a way that Japan didn’t. China has taken a tentative first step in this direction. In January, it set up the government-backed Tianjin Cultural Artwork Exchange to let investors buy and sell fractional ownership of paintings, calligraphy and other works of art — and so provide a rudimentary public market where investors, small and large, could, in effect, trade art shares.
What it and a similar exchange in France don’t let an investor do is invest in the broad art market or in an index of it. The art world doesn’t have an investment-grade index equivalent to a broad stock market index. Constructing one would be even more difficult than creating real-estate indices, which also have to contend with the issue of measuring a market of one-off products, properties in its case, works of art in the other; further, though art sales are an estimated $30 billion a year market, less than half of that is comprised of discoverable prices, i.e. sales at auction; three-fifths to two-thirds are private sales. Could Chinese buying provide the impetus for tackling those structural market problems? Or will it just create another bubbly fad that will eventually go pop?