artnet and the China Association of Auctioneers (CAA) have just published the second edition of their Global Chinese Art Auction Market Report, taking an in-depth look at the Chinese Art and Antiques market in 2013. This year’s report includes an introduction written by renowned art economist Dr. Clare McAndrew, as well as interviews with other well-known industry experts on such topics as online auctions, art financing, and art collecting. You can read Dr. McAndrew’s overview below, and download the entire report for free at www.artnet.com/caa.

Introduction

The art and antiques market in China has been by far the strongest growing market worldwide over the last 10 years. Its emergence on the global art scene from the mid-2000s has fundamentally altered the structure of the international art trade, and it has been the most important of all the newer art markets, both in terms of the size of its domestic sales and the impact of its buyers globally.

Chinese Art and Antiques have played an important role in the global art market for many years, with a strong base of both private and institutional collectors. However, China first emerged as an important marketplace for domestic sales in the early years of this century, when it began a path of rapid growth, fueled by a highly supplied auction sector and the pent up demand of an expanding segment of wealthy Chinese collectors and investors. The period from 2008 through 2011 saw exceptional growth in sales in the dominant auction sector in mainland China, with aggregate values increasing by over 500%. This boom in sales, which was made all the more stark as many other national art markets languished in the fallout from the global financial crisis, led to China overtaking the United States to become the leading art and antiques market worldwide.¹

After several years of seemingly unstoppable growth, the market finally cooled over 2012, as lower prices and decelerating volumes forced a sharp contraction in sales, and the market slipped back to second place in the global ranks. Recovery began in 2013, and China retained its global position, with sales in all sectors showing year-on-year gains. However the recovery was tempered by more cautious buying and a moderation in prices at auction, which experts believe has marked a new phase of maturity in the Chinese market. The wealth, supply, and economic dynamics all point to a solid outlook for long-term growth, however, this path is likely to be filled with many short-term challenges as the market continues to address issues in its regulatory framework, infrastructure, and other areas.

Auctions as the Engine for Growth
The global auction market is highly concentrated, with the top houses accounting for the bulk of the value of sales, as well as achieving the highest prices. This is also the case in mainland China, where the top 10 houses accounted for the majority (58%) of sales in 2013. The main houses are primarily located in Beijing, the epicenter of the market in China, accounting for the majority of sales (with a 54% share by value), and the largest home of high-net-worth (HNW) wealth.

However, the structure of the art market in mainland China contrasts significantly with the other major markets of its size internationally. In markets such as the US and United Kingdom, private sales through the gallery sector (and increasingly by auction houses) dominate the market, accounting for the majority of value. In China, on the other hand, auction sales have been the main engine of growth, and account for close to 70% of the market. The remaining 30% of sales are made by galleries (who deal primarily in Contemporary Art), private dealers, and sales directly from artists. The power and influence of auction houses in the art market in China extends significantly beyond their impact in the West. Because consistent sources of information and platforms for discussion on subjects relating to quality and value are still developing, auctions have played a major role in determining valuations as well as developing the general public’s exposure to, and ultimately taste in, art. This is in marked contrast to the West, where the network of galleries, experts, and consultants is very well developed outside the auction sector.

By the end of 2013, in the auction sector, there were 382 licensed auction houses in mainland China, the highest number in China’s 22-year auction market history, and up 59% in number since 2009.² Sales from these licensed houses reached US$6.1 billion (CN¥39.8 billion) in 2013, an increase of 22% year-on-year in RMB terms. These sales represented over 20% of all auction sales worldwide, second to the US with a share of 33%, but ahead of the UK with 17%. While 2013 values showed a significant uplift from 2012, they were still substantially less than the market’s peak in 2011, when sales reached US$9.3 billion (CN¥62.848 billion), having increased by five times in size in the space of just three years. Values plummeted in 2012, with the market losing more than half its value, while the volume of transactions contracted by 27%. The main reasons for the deceleration in growth were both demand factors (including a slowdown in economic growth and credit constraints), and a reduced amount of high-quality, high-priced works coming on to the market. Many art funds and other investive collectors also reduced their participation in the market during the year, which led to a decline in buying in some areas.

As stated above, the importance of mainland China as a center for domestic sales of art is a relatively new phenomenon, but Chinese Art and Antiques have played a significant role in the global art market for many years. Important Chinese artworks have featured in major museum collections around the world, and there are several generations of important private collectors. Meeting this demand, international galleries and auction houses have featured Chinese artworks in their sales, with 280 auction houses outside mainland China selling in this sector in 2013. Total sales from these houses reached a substantial US$2.3 billion in 2013 (up 42% year-on-year in US dollars), with Hong Kong once again consolidating its position as the center for the market (with a 70% share of international sales). Christie’s and Sotheby’s dominate in the external market, accounting for a 68% share of value in 2013 (75% of which is from sales in Hong Kong).

The entire global market for Chinese artworks therefore totaled US$8.5 billion in 2013, some 28% of the value of total sales of art and antiques auctioned around the world, with mainland China accounting for 70% of the total.

A Lower-Priced Market
Despite the fact that the highest-priced works tend to dominate media headlines, most lots sold at auction in China, like all other markets around the world, are transacted at the lower end of the market. In 2013, 95% of all lots sold at auction in mainland China were priced at less than CN¥500,000 (around US$77,500), while works priced at over CN¥10 million (around US$1.5 million) made up less than 1% of transactions. In the Fine Art auction market, 94% of lots sold in China were for less than CN¥500,000, on par with global averages.³

Since the contraction of the global market in 2009, a persistent feature of art sales worldwide has been a strong polarization of the market, with the high end performing well and accounting for an increasing share of the market, while the middle to lower segments struggle in the face of lower demand. However, the market in mainland China is somewhat more balanced, with the highest-priced works accounting for a smaller share of value than in markets like the US.

In mainland China’s Fine Art auction market, as in other markets around the world, works sold for over CN¥10 million accounted for a tiny fraction of the number of transactions, at just 0.1%.⁴ However, in terms of values, this highest-priced segment in China accounts for only a 14% share, significantly less than the US (at 66%) and the UK (at 54%). This low share reflects the lower number of multimillion-dollar lots sold in China in 2013, and the fact that sales at the highest end are generally at a lower price level than those in large external markets.⁵ A lower price ceiling is a common feature of a newer marketplace, which is still serving a relatively limited pool of buyers, but also indicated more cautious buying in 2013. At the height of the boom in 2011, including both the mainland market and Hong Kong, 23 works sold for over CN¥100 million (around US$15.5 million). This dropped to just five in 2012, and only four in 2013, which indicates a trend toward more moderate pricing at the top end, which is contrary to the seemingly unstoppable price escalations at high-end auctions in New York, where in excess of 50 artworks sold above US$10 million in 2013.⁶

The structural differences are also evident when looking at average prices. Considering only sales of Chinese artworks, average prices at auction are lower in China in all sectors than they are in international markets. Hong Kong and the UK had the highest averages in 2013, but France and the US were also higher than mainland China across the board.⁷

Performance by Sector
Fine Art has dominated Decorative Art in the global auction market over the last few years, both in terms of prices and aggregate sales. Within the Fine Art auction market, Post-War and Contemporary Art has become the leading sector in the global market, and where the highest prices have been achieved at auction. Globally, this sector accounted for 46% of the value of all Fine Art auctions in 2013, and 59% in the US.⁸

The market for Chinese Art, on the other hand, has historically been based mainly on Decorative Art, although this has also started to shift in recent years. (The Fine Art auction market accounted for 73% of the auction market by value in mainland China in 2013, and half of all lots sold.) However, despite the rapid growth in the Contemporary market, 20th-Century and Contemporary Chinese Art remains one of the smallest sectors, with just 7% of sales by value, and only 3% of transactions in 2013. Sales values were buoyed by a number of auction records during the year, with the two highest-priced lots sold in China in 2013 from Contemporary artists Wu Zuoren and Jin Shangyi (whose work entitled Tajik Bride became the artist’s most expensive oil painting sold at auction, at CN¥85.1 million), along with 17 other lots in the sector selling for over CN¥10 million. However, even at the very top of this market, what might be considered blue-chip Chinese artists sell for considerably less than their Western Contemporary counterparts. Looking ahead, while there have been some high points in this sector in 2014, many works only reached their low estimates or failed to sell. Even for high-profile artists, sales have been weak for second and lower-tier works, and only the very top pieces have attracted strong prices. This weakness is expected to continue in the low and middle ends of the market, and the price gap between the top and lower segments is expected to grow.

The largest sector in 2013 was, once again, Fine Chinese Paintings and Calligraphy, accounting for 66% of the auction sector by value in mainland China and 48% of all lots sold. 159 out of the 232 lots sold at auction for over CN¥10 million came from this sector, which also accounted for 70% of the value of this highest-priced segment. Within this sector, the highest average prices were found in older classical works, reflecting a different cultural focus in China, as well as limited supply. While scarcity has driven prices higher for older works, it could weaken sales in the future as the highest quality works are absorbed into the museum sector or by serious collectors with little intent to resell. Within this sector, Modern paintings accounted for the majority of its value (60%), and have continued to dominate aggregate values in the spring sales in 2014. The strength in this sector seems likely to continue as it is characterized by a mature base of collectors alongside a healthy supply of paintings, which will ensure liquidity and investment appeal. The Contemporary segment, although smaller, has also performed well, and, already in 2014, many young artists, particularly those born after 1975, have reached their personal records at auction.

Chinese Antiques and Artworks is the second-largest sector, accounting for 20% of sales in mainland China in 2013, and with just 37 works in this sector sold for over CN¥10 million. As in many older sectors globally, a key weakness lies in the limited supply of top-quality works coming on to the auction market. It is interesting to note that while this sector is relatively small in mainland China, it is the largest sector in the external market for Chinese artworks, accounting for 72% of transactions and 47% of sales values. The highest price paid at auction worldwide in 2013 for a Chinese artwork was in this sector: a gilt-bronze figure of a seated Shakyamuni Buddha, which sold at Sotheby’s in Hong Kong for over US$30 million. In addition, 147 other works also sold for over US$1million, predominantly in Hong Kong (accounting for 70% of the US$1 million-plus segment).

In the external market for Chinese Art, Fine Chinese Paintings and Calligraphy has the second-largest share (29% by value), while 20th-Century and Contemporary Art accounts for 24%, with the latter buoyed by a small number of record prices, including Zeng Fanzhi’s The Last Supper, which sold for US$23.3 million at Sotheby’s in Hong Kong, setting a record for the highest price paid for any Asian Contemporary artwork at auction.

Despite their different trajectories and features, each sector has been subject to the volatility in the market in recent years. After a market-wide boom during 2010 and 2011, all three sectors lost close to half their value over 2012. The recovery was also fairly uniform, with each increasing by around 20% in value over 2013, and bringing levels back close to those seen in 2010. This uniformity in performance is in marked contrast to the global market, where the Contemporary and Modern sectors have driven sales growth, while some older sectors have shown mixed results.

Buy-Ins and Excess Supply
The recovery in 2013 was both demand- and supply-driven. On the supply side, the volume of transactions in mainland China increased by one-third year-on-year, with the largest increases in the Fine Chinese Paintings and Calligraphy sector. The number of lots brought to auction over the last decade has increased by over 300%, however, those that sold increased by 190%. In 2004, 34% of the lots offered at auction were bought-in,⁹ whereas, in 2013, the rate was 51% in mainland China, up 3% year-on-year. This high rate of buy-ins is a persistent feature of the mainland market.¹⁰ Even in 2010 and 2011, at the height of the market’s boom, buy-ins reached 58% and 55%, respectively. This is an unusual trend in a booming market, as buy-ins generally fall as demand expands, and indicates an insufficient buyer base, as well as quality-related supply issues in the market.

The persistent problem of low sales rates shows that while sales improved in 2013, buyer confidence has been slow to return. Buyers have become more vigilant regarding provenance, along with a lower tolerance for what was perceived to be over-priced, low-quality works. Part of this caution undoubtedly relates to the persistence of fakes and forgeries appearing on the market. The continued lack of legislation on guarantees in the auction sector has failed to provide adequate incentives for suppliers, and leaves little protection for customers.

Many experts feel that the market has become a victim of its own success, with the rapidly escalating prices up to 2012 giving strong incentives to flood the market with whatever would sell, authentic or otherwise. Modern technologies and a high level of skill in reproductions have enabled works to be copied with far greater accuracy, making it more difficult, even for experts, to identify counterfeits. The gallery sector is still relatively small, as is the infrastructure of expertise and consultants in the market, which means that art buyers have less of a support network in this area than in many mature markets. Many experts feel that for the Chinese market to achieve sustainable growth, improve sales rates, and attract new buyers, there needs to be a higher level of trust developed between buyers and sellers in the auction market, as well as transparent guidelines to define authenticity.

Art Market Demand
Research on the spending habits of the HNW population has shown that wealthy Chinese consumers hold a relatively high proportion of their wealth in art and antiques. A low range of attractive options for investment, combined with a currency that is still not fully convertible, has supported a significant interest in alternative investments, including art and antiques. While the average global holdings of so-called treasure assets, such as art, antiques, and jewelry, is less than 10%, Chinese HNW individuals hold an average of 17% (versus 3% in India, 9% in the US, and 7% in the UK).¹¹

Art collecting in China has been boosted by the country’s strong economic performance over the last 10 years, with increasing average wealth and a rapidly expanding HNW population. From 2003 to 2013, GDP averaged annual growth rates of over 10%, and China has been one of the fastest-growing economies in the world. GDP growth contracted to 7.6% in 2012 (its lowest level since 1999), mainly due to poor export demand and curbs on speculative activity in the property market. In 2013, although growth was stagnant, China escaped some major economic setbacks and the so-called “hard landing,” as the property market began to revive, the banking crisis was relatively short-lived, and global demand in some of its key trading partners began to recover.

In 2013, mainland China’s aggregate wealth grew 10% year-on-year, reaching US$22.2 trillion, its highest-ever recorded level, making it the third-wealthiest nation worldwide next to the US and Japan. The population of dollar millionaires in China expanded by 10% year-on-year, and mainland China is now home to 4% of the world’s millionaire population.¹² In terms of the UHNW individuals (those with wealth in excess of US$30 million), China has an even higher share of the global population at 5%, the second highest worldwide next to the US.

Although China’s millionaire population has been steadily increasing, it still represents a tiny 0.1% of the total population of mainland China.¹³ The wide gap between offers and sales noted above undoubtedly reflects, in part, that there is, as yet, an inadequate number of active buyers to absorb the rapid growth in the volume of sales over the last decade, with art still being bought by a relatively small, but growing, segment of the population. The current reality in China is that the majority of the mainstream public does not yet have the disposable income necessary to enter the art and antiques market. However a positive trend for the market’s future development is that average incomes are growing at a very fast rate on the back of the country’s economic growth during the past two decades. China’s GDP per capita has grown close to 500% over the 10 years to 2013, but remains less than 15% of mature economies, such as the US. Its forecast growth to 2018 is, however, more than double that of the US and UK, which will slowly narrow the income gap between these art markets, and, as the population becomes wealthier, potentially widen the base of art buyers.

A rapidly expanding middle class with a strong appetite for luxury goods, particularly in urban centers such as Beijing, will undoubtedly boost the number of potential art buyers. China’s urban population of over 720 million now accounts for around 53% of the total population (up from 26% in 1990).¹⁴ The latest published statistics from the National Bureau of Statistics of China indicate that the average disposable annual income of an urban household at the end of 2012 (CN¥24,565) has increased a staggering 1,500% since 1990. It is estimated that in less than a decade, more than three-quarters of China’s urban households will approach middle-class status, with the highest growth in the upper affluent sectors, which is where the greatest spending is likely to come from on luxury sectors, such as art.

Challenges for the Future
The performance of the Chinese art market has been well documented as one of the most interesting global developments in the art trade’s recent history. While growth seemed unstoppable up to 2011, the last two years have shown, as they have in many other art markets, that there are limits and constraints to both demand and supply in the market.

Many within the art trade in China feel that the slowdown in 2012 was beneficial for the long-term development of the market. Excessive prices achieved during the boom years were seen as polarizing the art market (as they are doing elsewhere), and preventing the buyer base from broadening. Even some more established collectors stopped buying during 2010 and 2011, staying out of the market until prices settled down and returned to more realistic values. With these collectors out of the market, it rapidly became dominated by speculative buyers, many of whom hoped to flip art quickly amidst the inexorable growth in auction prices. On the selling side also, keen to capitalize on the booming market, auction houses flooded the market with a volume of lots that would have been impossible to absorb with any longevity. Many collectors complained that there were simply too many works for sale of too low quality, estimates were too high, and that there appeared to be little systematic or scientific approach to authentication and valuation.

Two of the main issues delaying the participation of more mainstream buyers in the market to date have been that incomes have been too low, and, up to 2012, prices were too high to make the market accessible. The contraction of the market in 2012 is thought to have shaken out some of the highly speculative investors, while also helping to correct prices to more reasonable levels, which encouraged buyers in returning to the market in 2013. There are, however, still a number of issues in the auction market that will present challenges to its development over the coming years.

In the wider Chinese economy, the move from export-led growth to a consumption-based economy has created a number of transitional issues. The art market potentially faces the opposite challenge: if and how it will move from being a protected domestic market supported by local sales to a more international center for global trade. The development of a strong national auction sector has been critical in growing the domestic market, which is now relatively self-sustaining, however, its continued protection and limited international exchanges will ultimately prevent it from gaining international status.

The market for Chinese artworks sold outside of China, although now much smaller than the mainland, performed strongly in 2013, and more auction houses than ever around the world sold artworks in this category. These houses have been eager to capitalize on the rising purchasing power of Chinese buyers, alongside meeting the demands of the more stable base of Western collectors in the sector. As more of the most highly valuable artworks are repatriated to China, Western collectors in the sector are increasingly paying escalating prices for a dwindling supply in international circulation, which will continue to boost prices at the top end in the external market.

With import charges and export restrictions hampering cross-border trade from mainland China, Hong Kong has now become the global market hub for the exchange of Chinese artworks. It remains one of the most open and business-friendly environments in the world, which has encouraged both local businesses in the art market to flourish and international auction houses and dealers to consolidate their sales efforts there for both China and the wider Asian region. Even the largest mainland houses, Poly International and China Guardian, made inroads into the external market in the last two years, holding auctions in Hong Kong to take advantage of low taxes, a highly developed infrastructure, and significant buyers. In 2013, sales in Hong Kong accounted for around 21% of the value of Poly International’s sales, and about 10% at China Guardian.

The infrastructure of the art market in mainland China still requires development as the market increases in size. While the auction sector has flourished, the gallery sector, although expanding rapidly, is still relatively underdeveloped. While there have been a number of smaller galleries opening in the last few years, the gallery sector is increasingly consolidating around less than 20 major galleries, who have developed strong positions, but are still dwarfed by the value and volume of sales in the auction sector. The rapid increase in the size of the market across all sectors has also caused a strain on ancillary businesses in specialized areas, such as packaging, logistics, warehousing, and shipping for the art trade. Due to the relatively short period in which the market has developed, there is also a shortage of experts in some areas, for example in art appraisals, valuations, authentication, and insurance.

The regulatory framework and legislation in the market also requires continued development to ensure more stable long-term growth. The problem of fakes, counterfeit works, and authenticity is ongoing, in some smaller auction venues and in the Modern sector of traditional Chinese paintings. Although seasoned collectors are aware of the issue (a fact that is reflected in the high rate of buy-ins), it has the potential to deter new buyers who see the market as high risk. Issues related to late and non-payment, false bidding, and other illegal operations have all arisen, and although improving in many auction houses, have undermined the credibility of some.

The problem of late and non-payment by winning bidders at auction is not unique to China, however, its extent is clearly much more marked and persistent than in other markets. There are several reasons for high rates of late payment in the market, including issues related to authenticity or provenance, the business integrity of the buyers, and a different culture of negotiating and transacting. As of May 31, 2013, among all licensed auction houses, 38% of lots sold for over CN¥10 million in 2012 were not fully paid, an improvement of 10% year-on-year. However, the rate of works not cleared for all price levels was 44%, which is still a considerable share of the market.

To tackle the issue directly, some of the larger auction houses have introduced deposit requirements for bidders. Christie’s and Sotheby’s have had cash deposit requirements for their Hong Kong sales for several years, however, Poly International and China Guardian have recently followed suit.¹⁵ These schemes appear to be working well, with clearing rates improving dramatically over the last year at both auction houses. Non-payment issues are now mainly centered on smaller auction houses, which face a much higher risk of non-payment and all of the subsequent cash flow problems that ensue for their businesses.

Private sales by auction houses have been a significant trend in the global art market with the major auction houses now attributing up to 20% of their sales values annually to this channel.¹⁶ Under the Auction Law of 1996, as well as under other regulations related to auctions, Chinese auction houses are not expressly permitted to conduct private sales, and, to date, most auction houses have therefore avoided the practice, at least under their own name. However, Chinese auction houses have quickly realized that private sales can offer greater privacy to clients, reduced operating costs, the opportunity to provide tailored art advisory services, and improved clearing rates, and are now lobbying for a clear regulation to be drafted on the subject. Auction houses had already found ways to work within this “gray area” of the law, by holding private sales under alternative, non-auction parts of their businesses. In 2013, Poly International offered five private sale exhibitions, which focused on Chinese Modern and Contemporary ink paintings under its VIP Service Department, and it seems likely that other auction houses will begin similar activities in the future.

While the auction sector remains highly protected from foreign competition, there have been some inroads made into opening up the market in the last two years. In 2012, Sotheby’s China, a venture between Genus and Sotheby’s, was launched. In 2013, Christie’s received a license to operate in the mainland. As foreign auction houses, both Sotheby’s and Christie’s are banned from trading in so-called “cultural relics,” which include Chinese porcelains and classical ink paintings and porcelains—the most valuable categories in the Chinese art trade. The two houses have taken different approaches to market entry initially, each with two relatively small auction sales to date. Christie’s has concentrated on introducing big-name Western artists into China, alongside Asian works, while Sotheby’s has catered more to local tastes, selling mainly Modern and Contemporary Chinese Art.

The major Chinese auction houses have been making fundamental changes in their structures to stay competitive with new global entrants. Poly Culture Group, the owners of Poly International, raised over US$330 million in an IPO in the Hong Kong Exchange in early 2014, the first mainland Chinese house to float on an exchange, putting them in direct competition with Sotheby’s and other publicly traded companies. Apart from raising capital, the IPO will also force more transparency on the business as a whole. In 2014, China Guardian also announced a significant restructuring plan for the company, dividing the newly formed “Guardian Culture Group” into two subsidiaries: Guardian Auction and a newly established Guardian Investment, which is believed will carry out related investment services (such as private selling, financial services, and, possibly, loans).

Many experts believe that the ever-increasing position of these two auction houses means that the mainland market could be nearing the duopolistic structure seen in the global market, where Sotheby’s and Christie’s dominate auction sales. This may require greater specialization or segmentation by second-tier auction houses in order to continue to survive, and some smaller and progressive auction houses have already begun to focus their catalogues on more distinct sectors of the market in an effort to maintain a distinctive and niche presence.

Finally, the wider economic context will undoubtedly affect sales going forward. While the long-term prospects for China are positive, economic forecasts indicate that the slowdown may deepen this year as China endures the short-term costs of rebalancing its growth model for the long-term good. These issues affect the confidence of consumers and their discretionary spending, which ultimately filters down to the sales performance of the art market. On the positive side, rising average incomes, wage inflation, and a slowly recovering property market have boosted consumer confidence, while the longer-run wealth dynamics will ensure demand remains relatively robust. There remains a very high level of financial confidence in China among the newly affluent, with the majority feeling confident that their household incomes will increase significantly in the next few years.¹⁷ These trends are very important for the art and antiques market as they represent the potential for a new wave of demand in the market, which helps to maintain sales and give a welcome boost to China’s lower and middle markets.

Dr. Clare McAndrew
Founder and Director—Arts Economics

Endnotes

¹
References to global market data are taken from TEFAF Art Market Reports by Arts Economics.

²
The number of auctions houses in China is just 3% of the total number of global auction companies, and significantly lower than art markets such as the US and UK (with just over 4,000 and 1,000, respectively, in 2013), despite generating sales of art at a similar level. From Arts Economics (2014) TEFAF Art Market Report. TEFAF: Helvoirt.

³
The global average for works sold below €50,000 (around CN¥450,000) was 93%.

⁴
The global average for works sold for over €1 million (around CN¥9 million) in 2013 was 0.4%, and 1% in the US and UK.

⁵
In 2013, for example, the top 10 lots in mainland China ranged from prices of US$5 million to 13 million, whereas in the US, they ranged from US$46 million to US$142 million (and, in the UK, from US$16 million to 45 million).

⁶
The external market for Chinese artworks falls somewhere in between: lots for over CN¥10 million / US$1.5 million accounted for 1% of Fine Art auction transactions, and 20% of values (with the top 10 Fine Art lots ranging from US$9 million to 23 million). Including Decorative Art and Antiques, the top 10 ranged up to US$30 million.

⁷
Average prices can be somewhat misleading regarding where most of the trade takes place as they are highly skewed towards high-end lots. It is interesting to note that while average prices are lower in China, median prices at Fine Art auctions have consistently been higher than other large markets, indicating that, although the market does not reach the same level, there is a more even spread of prices at auction.

⁸
Including all auctions of both Fine and Decorative Art and Antiques, Post-War and Contemporary Art accounted for close to 25% of the global art and antiques market in 2013.

⁹
Arts Economics (2013), The TEFAF Art Market Report 2013. TEFAF: Helvoirt.

¹⁰
The rate of buy-ins for Chinese artworks sold outside the mainland is similar to the averages of more mature markets of less than one-third in 2013.

¹¹
Barclays (2012). Wealth Insights: Profit or Pleasure. Exploring the Motivations behind Treasure Trends. Barclays: London.

¹²
The term “dollar millionaires” is taken from Credit Suisse’s Global Wealth Databooks (2010 to 2013), and includes those with net wealth greater than US$1 million, with wealth defined as financial assets plus non-financial assets less debts.

¹³
The skewed distribution of wealth is a common phenomenon worldwide, however it is considerably more unequal than in Europe (where 2% of the population are millionaires) or North America (with 5%).

¹⁴
Estimates from the World Bank, 2014.

¹⁵
Poly International now requires cash deposits of CN¥500,000 to 1 million, with the stipulation that the buyer must finalize payments within 35 days. China Guardian introduced a “Charted Membership Project” in 2012, which requires new bidders to pay deposits (ranging from CN¥200,000 to 2 million) until they establish a good payment history and become “members.”

¹⁶
Arts Economics (2014), TEFAF Art Market Report 2014. TEFAF: Helvoirt.

¹⁷
Research by McKinsey at the end of 2012 indicated that three-quarters of the country’s affluent consumers believe their household incomes will increase significantly in the next five years. See McKinsey and Company (2012) Luxury without Borders: China’s New Class of Wealthy Shoppers Take on the World. McKinsey Insights China: Beijing