Small city looks at the big picture

It's like any small city in China. Motorcycles ride on narrow streets with small houses on both sides. A new railway station has recently appeared in a neighborhood with shabby buildings scattered around.

In Putian, Fujian province, it's difficult for an outsider to detect clues of its connection to Western culture from its appearance as a gradually urbanized small city.

But a decorative painting hanging in a popular restaurant in New York may have been produced in a house in Putian.

The city is one of the biggest producers of commercial oil paintings, or decorative paintings, in China, together with Xiamen in the same province, and Shenzhen, in Guangdong province.

About 70 percent of the commercial oil paintings in the United States and Europe came from China in 2005, according to industry estimates.

Norwegian art dealer Kjell Pettersen comes to China twice a year, and goes home every time with 150 to 200 oil paintings he has bought in Dafen village, an area where commercial paintings are made and traded in Shenzhen. During his last visit in June, he spent 2,700 yuan ($423.9) at a gallery in the village.

"You can find good decorations, and also very good paintings inside," he said, pointing to stacks of completed canvasses in the gallery.

There are a lot of people who paint in Europe, "but in my country, if you are an art student, you get a salary from the government, so you don't have to sell, and that's why the prices are so high," he said. The canvas alone for a 65 yuan painting in Dafen would cost 300 krone ($51) in Norway, he added.

"Business is business," he said. "You have to know about prices when you are a dealer."

Foreign dealers like him have shored up China's commercial painting exports over the past 20 years. It is similar to any other manufacturing sector in China, with its low costs and sufficient labor pool.

The total value of Dafen's oil painting industry reached 3.9 billion yuan last year, almost 30 times the figure in 2004, according to Dafen village administrative office. About half went to overseas customers in 2011, and the proportion was even higher in previous years.

Emerging markets

Although strong demand from the US and Europe helped China turn a personal craft into a mass production industry in the past decades, it now faces a challenge from shrinking orders from developed markets.

The drop in orders has also led to intensifying price wars, as in many other manufacturing sectors where lowering prices is a common practice to win orders, especially for weaker players.

All these factors have combined to squeeze companies' profit margins.

For dealers, it fell from a peak of around 40 percent to around 10 percent, Lin said.

Due to these pressures in traditional markets, oil painting companies are increasingly turning their attention toward emerging markets.

"Asia, South Africa, and South America are highlights of our overseas business," said Zhuang Deyi, chairman of Xiamen Union Arts Co Ltd, an oil painting producer in the city.

Emerging markets, such as Russia, India, Argentina and Brazil, account for 20 to 30 percent of the city's total sales of oil paintings, said Zhuang, who also heads Xiamen's association of oil painting companies.

Driven by demand from emerging markets, exports of paintings - mainly oil paintings - from Xiamen increased more than 70 percent year-on-year in the first half of this year, reaching $7.4 million, according to Xiamen municipal bureau of commerce.

The domestic market, also an emerging one, is growing at an even faster rate, Zhuang said, with demand coming from hotels, clubs and individual customers with higher incomes.

"Before 2006, almost no company in Xiamen focused on the Chinese market. But now, about 40 percent of the oil paintings made here are sold domestically."

It is a similar story in Dafen. Domestic sales, which have increased rapidly, now account for around half of the market, according to Dafen village administrative office.

Up the value chain

But despite these new opportunities in emerging markets, oil painting producers in China face the same challenges as their counterparts in other manufacturing sectors, such as low added value, a lack of sales networks and branding.

Commercial paintings used to be reproductions of famous works of art or certain patterns that orders designated, and most of them remain so. But the ability to produce replicas, with low added value, is not enough.

Lin from Putian said the industry could learn some lessons from the clothing industry.

"It starts with research and development," he said.

"A producer of paintings should find a good selling point - the colors, styles, and aspects that are most popular at the moment, and then provide his own designs."

Providing a self-developed product adds value, and gives the company more bargaining power.

"A Claude Monet replica may be sold for 200 yuan, but if you refer to Monet's use of color and at the same time, come up with your own composition, the painting may be worth 500 yuan," he said.

Yao Dingkang, an international trade expert, said oil paintings should be designed according to their final use, for example, with different series for home decoration, restaurants, hotels and churches. This will be more targeted compared with the current classification of subjects and styles, he wrote earlier in a commentary on the industry.

Apart from improving their designs, some producers have gone even further to provide completely original works, going from decorative paintings to fine art.

Dafen has been trying to change into a producer of both replicas and original artworks, targeting the high-end market. It terms the strategy as "walking on both feet".

An increasing number of galleries of original works have appeared in the area, with prices starting from several thousand yuan for a painting. About one-third of the oil paintings produced in Dafen are original works, according to the village's administrative office.

Chen Dawei, a contemporary artist in Dafen, said most of his paintings are sold in China, while in the past his works mainly went to Europe.

But fine art is a different world from commercial painting. It's about taking part in exhibitions, and entering galleries of original works and auctions, which artists in Dafen village have to learn step by step, he said.

Some dealers have made efforts in e-commerce to take advantage of higher sales prices overseas.

Chen Linyan, who used to work for an outdoor sports equipment company, quit his job last year to open online stores on eBay, selling paintings from Putian.

He entered the industry after he found that an oil painting priced at 200 yuan at a Chinese gallery can be sold for $50 to $60 on eBay, and the prices are still attractive for overseas consumers.

A painting from Putian may be sold at 10 to 100 times its production price when it reaches a US or European customer through a number of art dealers, according to industry estimates.

The majority of the paintings Chen sells are reproductions, which he gets from painters in Putian. After deducting production and international delivery costs, his workshop can have a gross margin of 20 percent, earning about 80,000 yuan a month, he said.

Yao, the trade expert, suggested Chinese oil painting producers change from being "manufacturers" to "distributors", selling directly to overseas markets, he wrote in an earlier commentary.

"The first step toward going global is to set up an office in the market for the convenience of contacting customers," he wrote.

"If everything goes well, a company can then have an exhibition center, sales center and distribution center overseas."

While an increasing number of Chinese players have tried to set up overseas sales networks, the move is not as easy as some imagine.

"Companies can price the paintings higher in this way, but the profits they get are not as much as they may originally think," said Zhuang from Xiamen, adding that the high costs of overseas marketing, transport, taxes and expertise will eat into margins.

Faced with difficulties in sales networks, Putian plans to build a trade center that can eventually hold 1,000 oil painting workshops and galleries. Some 50 galleries will open there in the near future, said Putian's Lin.

Xianyou, a county of Putian, also plans to build an industry park with 1 billion yuan investment that will be home to 100 oil painting companies and thousands of studios .

The moves will enable Putian to change from a production base to one with sales channels. Painters that work in the numerous obscure houses in the city may eventually move to a cluster of studios, where customers from China and beyond can visit and buy paintings.

chenlimin@chinadaily.com.cn

(China Daily 08/17/2012 page13)