China’s Art Industry: Distrust of Domestic Masterpieces
The art industry in China is one of the world’s largest. Seeing the opportunity for massive profit, counterfeiters have been prolific in the past decade.
The problem is not limited to the fringes. In 2015, the chief librarian at a Chinese university responsible for an art gallery was caught after a years-long scheme in which he stole 140 paintings, replaced them with forgeries, then sold the originals for over $6 million USD.
A 2013 New York Times three-part series highlighted the scale of China’s art fraud problem, which taints China’s auction houses, including the state-run Poly Auction. In 2011, Liu Yiqian, a taxi-driver turned financier and one of China’s largest art proponents, sold Qi Baishi’s “Eagle Standing on a Pine Tree” (pictured above) for a record $65.4 million, but the painting remained in a warehouse after doubts about authenticity prompted the winning bidder to withhold payment.
The New York Times reported that while China had one of the world’s largest art auction markets, “as much as a third of the country’s auction revenue in recent years – did not actually take place.”
According to artnet, there has been a steep decline in art sales in mainland China since 2012, likely due to fraud and nonpayment issues—with a nonpayment rate of 41% in 2015. Artwork is often used as a gift in Chinese business transactions and the decline in art sales within China may be in part due to President Xi Jinping’s crackdown on corruption and gifts.
Deloitte reports that in March 2016, China upped its regulation of the art industry; greater protection of artist, trader, and consumer rights should result in less counterfeiting.
Despite the decline within China, the artnet report reveals that sales of Chinese art outside China have continued to increase, with China representing 32% of the global art market. The United States is the largest importer of Chinese art.
With many Chinese hesitant to buy Chinese art, is there an opportunity for imports to gain market share, as with the prevalent Chinese distrust of domestic cosmetics and child-care products pushing consumers toward foreign brands?
Like other industries in China, foreign auction firms historically were required to enter partnerships with Chinese firms to gain entry into the country; however, in 2013 Christie’s secured a license to operate independently in China. In 2016, a Chinese tycoon’s company became the largest shareholder in Sotheby’s, which also operates in China.
However, foreign firms in China are still prohibited from selling “cultural relics”, limiting the market potential until the government further liberalizes the industry. For now, the opportunity is limited to contemporary art.
The opening of the Chinese market to foreign auction houses and increased legal protections bodes well for the market for imported art in China, especially given the rise of China’s ultra-rich and the increasing number of Chinese travelling internationally and being exposed to other cultures and artistic traditions.
MBA Candidate 2017