Chinese art may face trouble as prices soar
By Simon Rabinovitch, Reuters
June 16, 2008, 12:00 am TWN
BEIJING -- When Chinese artist Yue Minjun sold his painting "Gweong Gweong", inspired by the bloody Tiananmen Square crackdown in 1989, he received US$5,000.
That was in 1994. Fourteen years later, the painting of toothy men dropping like missiles from war planes over Tiananmen, fetched US$6.9 million at an auction last month.
Feverish bidding at Christie's spring sale in Hong Kong did not stop with the human missiles. Wild applause erupted when Zeng Fanzhi's painting of youths wearing absurd masks and Red Guard scarves went for US$9.7 million, a new auction high for any Asian contemporary artwork.
Collectors and critics reacted with amazement but little surprise. Prices for Chinese contemporary art have soared over the last five years, making artists rich and investors even richer.
But the boom is now sowing doubts in a country where the stock market, which once seemed a guaranteed fount of money, has shed half its value from last year's peak.
Could the Chinese art market be near the edge of such a precipice?
"The market definitely has a bubble for certain artists. And those bubbles will burst," said Zhang Xiaoming, head of Chinese contemporary art for auctioneer Sotheby's.
"But I don't think the market is going to go down substantially. It's just becoming smarter. It's not everything goes," she said.
That selectivity weighed on two smaller art auctions in Beijing in late May, where bids were low and lots unsold.
Enthusiasm may have been dampened by the May 12 earthquake in Sichuan province, which left nearly 90,000 people dead or missing, but the 18 percent drop in proceeds at the Poly International Auction sounded a warning.
"Art is very much like any other asset. It has its ups and downs," said Michael Moses, co-creator of the Mei/Moses indexes, which tracks art prices dating back to 1875.
Western contemporary art sizzled from 1985 to 1990, rising at an annual compound rate of 30 percent, before shedding 65 percent in the next five years, he said.
Art of investing
Like picking the right stocks, making the right choice in Chinese art has become a concern for mainstream investors.
Where global financial markets remain jittery after the credit crisis, art prices have climbed uninterruptedly. Paintings have rarely looked more attractive as alternative assets, and Chinese contemporary art has been at the head of that class.
Auction prices for China's 18 hottest artists multiplied 13-fold from 2003 to 2007, according to Chinese art Web site Artron (www.artron.net). But Artron registered a 4 percent drop in prices for their works in the past half year.