Editorials

Fine art of speculation

(China Daily)
Updated: 2011-01-31 07:53

Some works of art in the hands of eminent families are expected to appear on the market this year lured by the fantastic prices Chinese treasures have been fetching at auction. So there are expectations of a continuing surge in art prices this year as China's millionaires and billionaires keep their eyes open for works of art, antiques and wines to add to their collections.

Auctions are perhaps the most popular barometer of the recent craze for Chinese art. China has overtaken France as the world's third-biggest art market after the United States and Britain.

Chinese works of art smashed auction records, totaling 57.3 billion yuan ($8.7 billion) last year, an increase of 150 percent, according to Artron.net. Sixteen items - most of them ancient paintings or imperial porcelain - sold for more than 100 million yuan ($15 million) a piece at the autumn auctions.

The personal wealth of China's rich has steered clear of the global financial crisis. A recent report of China's personal wealth released by Forbes China, the Chinese-language edition of Forbes, and China Construction Bank, found that Chinese individuals' total assets stood at nearly 100 trillion yuan ($15 trillion) at the end of 2010.

As a result, the nation's arts market has enjoyed an annual growth rate of 25 percent. Last year, 11 of the world's top 20 best-selling artists were Chinese.

Some of the country's financial institutions are also looking to tap into the lust for art and collectibles. China Merchants Bank launched a new "art banking" service for China's rich in 2009. The model allows private banking clients to pay a deposit for an artwork and take it away to enjoy for one year after which they have the option to purchase it or return it for a full refund.

Private clients with assets of more than 10 million yuan ($1.5 million) are targeted by the fund. It works in collaboration with the China Contemporary Art Foundation.

But like so many other markets, the art market is driven by speculation and greed.

In 1974 the British Rail Pension Fund decided to invest in art, eventually devoting some $70 million, or about 3 percent of its holdings at the time, to the venture. The limited amount of investment was designed to prevent a rapid rise in the prices of artworks and abnormal situations in the art market.

This practice is unthinkable now in China and there are some suggestions that the Chinese art market is a bubble that will burst.

(China Daily 01/31/2011 page8)