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China Focus: China's art market booms, but bubbles loom

01-05-2012 15:38 BJT

BEIJING, Jan. 5 (Xinhua) -- What was China's hottest investment market in 2011? No, it wasn't stocks or apartments. It was art.

Driven by speculative capital fleeing the country's turbulent stock market and a cooling real-estate sector, the art market showed strong growth with trade volumes expected to exceed 200 billion yuan (31.75 billion U.S. dollars) in 2011.

Turnover of China Guardian Auction Co. and Poly International Auction Co., the country's two largest auction houses, soared to 11.23 billion yuan and 12.1 billion yuan in 2011, representing a year-on-year rise of 49 percent and 20 percent, respectively.

GDP IMPETUS

With fast increases in personal wealth and a growing middle class, Chinese investors have flocked to the art market to obtain alternative assets.

Statistics showed that the annual rate of return on art investments stood at around 26 percent over the past six years, outperforming the rates in the stock market and housing sector, both of which with large risks.

Meanwhile, Chinese works of art shattered auction records. Sixteen items -- mostly ancient paintings and imperial porcelain -- sold for more than 100 million yuan each in 2010.

In May 2011, a painting by contemporary Chinese artist Qi Baishi sold for 425.5 million yuan, a record high for contemporary modern Chinese paintings and calligraphy.

An art market cannot thrive without a booming economy. Despite weak external demand due to wobbly recovery in the United States and the sovereign debt crisis in the European Union, China's economy managed to expand by 9.4 percent during the first three quarters of 2011.

When a country's per capita GDP reaches 1,000-2,000 U.S. dollars, its citizens create demand for art investment. When the country's per capita GDP hits 5,000 U.S. dollars, its art market will enter a fast expansion period, experts said.

Although art investment in China is still at an early stage as its GDP per head just reached 4,000 U.S. dollars, market participants believe the market has huge growth potential.

"China's art market is facing tremendous opportunities, underpinned by the prosperity of the cultural industry and the gradual maturity of consigners, buyers and other market players," said Kou Qin, vice president of China Guardian Auction Co.

In 2010, China overtook the United Kingdom to become the world's second-largest art market after the U.S.

China's auction and gallery sales totaled 169.4 billion yuan in 2010, up 41 percent year-on-year, accounting for a 23-percent share of the global market, according to a report issued by the Ministry of Culture.

 


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