THE LATEST ANNUAL survey of the Chinese art market by artnet, a leading art market and auction company based in New York, provides another alternative indicator of China’s slowing growth.
Although art is considered an alternative asset class by financial investors and the Chinese art market experienced the sort of giddy spike in prices in 2011 that would not have looked out of place on the Shanghai stock exchange before the recent collapse of equity prices, this Bystander would not want to extend the metaphor too far.
For one, there has been a shortage of high-quality, high-priced works going under the hammer. Nor should the effect of President Xi Jinping’s anti-corruption campaign on conspicuous consumption be overlooked. Overall luxury spending contracted for the first time in several years last year.
Authorities’ attention has been switching from the the personal luxuries segments (fine wines and spirits, jewelry and cars) to property and, increasingly, art. Gifts of antiques, calligraphy and paintings to officials can now be deemed as bribes. It has long been suspected that art auctions have provided a way to ‘launder’ bribes with ‘gifts’ being subsequently sold at auction at inflated prices.
Yet there are some straws to be taken from the 2014 art-sales figures. Auction sales in mainland China (the overwhelming majority of art sales in the country) declined 9% year-on-year to $5 .5 billion, a 40% fall in value in U.S. dollar terms since the market’s 2011peak. However, sales outside China at $2.3 billion in 2014 ($1.8 billion of which were made in Hong Kong) were barely changed from the previous year.
That suggests that it is domestic Chinese buyers who for reasons of prudence or necessity are keeping their cash in their wallets.
That all said, as the report notes and is true the world round, only a tiny portion of China’s population has the financial means to engage with the art market on an active or regular basis so any broad economic conclusions should be approached with circumspection.
What did catch our eye, however, was that up to 63% of all lots sold for more than 10 million yuan ($1.6 million) last year were left unpaid or only partially paid. This non-payment rate is up 22% from 2013 and points to a credit pinch.