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China’s Art Market Shoots Through The Roof

An astronomical price for a work by Chinese painter Qi Baishi offers clues to where China’s art market – and other sectors of the economy – may be heading.

Qi Baishi's 'Eagle Standing on Pine Tree with Four-character Couplet in Seal Script
Qi Baishi's "Eagle Standing on Pine Tree with Four-character Couplet in Seal Script
Zhao Xiaoxuan

BEIJING - The art market in China has been breaking price records on a regular basis over the past 20 years. One million RMB ($154,000) for a top painter's work was considered an astronomical price a decade ago. Last year, a new record for the sale of a modern Chinese painting reached 100 million RMB ($15.4 million). Even that price has now been topped, several times over.

A Qi Baishi painting called "Eagle Standing on Pine Tree with Four-character Couplet in Seal Script," which was once given to former Chinese leader Chiang Kai-shek for his 60th birthday, shattered the record last week with a price of 425 million RMB ($65 million).

Even if the auction price of Qi Baishi's painting is news itself, what deserves even more attention is the way the public and media have responded. The work in question had attracted significant interest even before the auction because of Qi's importance, the large size of the painting, and because its potential political significance. Who sold it? Who bought it? Why was it so expensive? What could prompt a buyer to pay such a price?

The renowned collector Liu Yiqian was the lucky seller, cashing out with some $45 million on the deal.

Of course, the auction house says such a remarkable price is merely a reflection of the real value of this wonderful painting. Others have taken the sale as the clearest sign of the rising irrationality of the art market, the expanding speculative bubble, and the inevitable crash that will follow.

Why is this painting so precious? Whether or not we consider it to be expensive is a relative question; the outsider doesn't need to worry about the poor buyer having overpaid, because the price of art is not decided by the seller, but by the buyer and what he is willing to pay.

This painting is la crème de la crème in the market because of the combined effects of its various themes. Indeed, an astronomical price had been predicted by many beforehand. The best art collectors don't worry about high prices, but look to avoid buying the wrong thing. A fake vase, a poorly executed painting, whatever the price, it's too much. The best works, even overpriced, have the potential to bring unimagined returns.

So is there a bubble? Are these prices dangerous? These were the questions circulating on social media accounts of the art world cognoscenti. Some are worried that China is repeating the experience of Japan in the 1980s where the whole art market went belly-up.

The frequent renewal of record prices poses the question "Where does this train stop?" In fact, there is always someone ready to pay more. As long as the Chinese economy keeps booming, and China continues to produce wealth, the magic won't end. The Japanese companies who snapped up French impressionists in the 1980s ran into a financial crisis and had to offload them at fire-sale prices. The Chinese art market has seen long continuous growth. Huge sums enter the market. The new buyer brings new capital.

Artists like Qi Baishi, Xu Beihong and Zhang Daqian are considered to be market indicators. That is why it is in most people's interest that their prices continue to soar. Just like the overheating stock and housing markets, the expansion of the art market is due to overflowing capital looking for a safe niche. Housing prices may be the real bubble, and if inflation is looming, it is urgent to find safe harbors for wealth -- in assets that can retain their value. Investing in art is part of a risk management strategy.

But with the art market in such strong expansion, one could ask why Liu Yiqian decided to sell. Is he, deep down, pessimistic about the market? Does he think now is the moment to cash out at the top?

A great painting does not need to stay in one collector's hands forever. Art works find their market price over time by changing hands. In the 1980s and 1990s, a number of important collectors decided to sell their collections through special auctions, propelling the market to new heights. Today, some famous collectors are again releasing their exceptional treasures -- one by one, this time -- and in doing so, heat up the market. Restless capital is looking for sure bets. The art market has a long and prosperous future ahead.

*Director of Academic Research Department, Beijing Bonwin Contemporary Art Investment Company

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