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Chinese nouveaux riches discover western auction houses. By Ashley Charles Jenner
A free market in the form of western auction houses catering to a few super-rich citizens in the world’s largest ironclad centrally planned economy in a Communist proletariat state holding all the wealth is a riddle wrapped in a mystery inside an enigma (to quote Churchill).
What is clear is that the materialistic nouveaux riches arrivistes have scaled the fortress walls using banknotes as ropes. 17th century Moliere’s Bourgeois Gentleman was overjoyed to discover he had been speaking prose for all of his life, thereby elevating him to same cultural level as the old money French aristocratic literati.
Chinese nouveaux riches are discovering that their new wealth gives them fellow connoisseur status with bow-tied experts at Sotheby’s art auctions. Following the wave of private enterprise and the rapid development of coastal cities, apparently China now has nearly 10,000 entrepreneurs each worth $10 million or more, representing perhaps the fastest growing such group in the world. Sometimes they make their money in rather mundane ways, such as pig-feed baron Liu Yongxing (the English say “where there’s muck there’s brass”), the construction industry, property, consumer goods and of course the internet. For obvious reasons, there do not seem to be too many Chinese investment bankers (yet).
The economic importance of China’s nouveaux riches has surfaced especially because of their spending habits. These include the Ferrari sports car, the Princess yacht, Giorgio Armani suits, Davidoff cigars, and Christie’s auction house. Then there are all the other usual suspects like Cartier and LVMH. Leisure pursuits include travel to western type countries, playing golf, and wine tasting. In part, humble origins can explain the spending obsession of this newly bankrolled class. Many now rich Chinese grew up poorly educated and in conditions of privation. Now that they have vast sums of money in their accounts, they believe they should indulge themselves a little. Traditionally, Chinese women have had their treasure chest of gems, such as emeralds, which they would flash off at parties and weddings. Now they want an upgrade in their immediate consumption level.
The first wealthy generation was reluctant to show the color of their money. They may have had all the trappings such as a magnificent house, a fancy timepiece and a slick fleet of wheels, but they would not parade them in public. This is still the style of Warren Buffet, the richest man in the world, who has lived in the same modest dwelling for most of his life, and Microsoft’s Bill Gates who is going to donate his wealth to good causes. Wal-Mart’s Sam Walton was famous for driving an old pick-up truck and entertaining business visitors at the local diner.
Although a temporary setback has come in the form of the global financial crisis and has wiped out vast amounts of personal wealth, prompting a plunge in consumer habits, all this financial restraint is lost today on the second generation and successful young Chinese professionals of both genders who are determined to show off their wealth.
For a long time in Communist China, such profligacy could have meant prison or worse. Later the government relegated extravagance to a social peccadillo as long as the moneybags kept it out of sight. Now, being loaded is a cause for joy, bringing thousands of Chinese multi-millionaires into open daylight. Finally, the Communist Party overtly accepted the reality of the situation and it is willing to rub shoulders with these high-powered money citizens. The gap between the very rich and the poor is the greatest it has been for many decades. This type of western opulence was never supposed to go beyond Hong Kong. Just as in other BRICs, uneven income distribution often leads to social instability although the inscrutable Chinese government does not conceal its determination to avoid upheavals. To make matters worse, most Chinese believe that this wealth was the result of skullduggery. As the Chinese economy recovers, private fortunes will grow exponentially and a 180-degree reversal on private wealth may even serve as a harbinger about what future political model the Communist government has in mind.
One of the main beneficiaries of this new money has been the Chinese contemporary art market at least up until August 2008. The market seems to consist of two broad segments. One is for traditional brush-and-ink painters who arise from a centuries-long tradition of scholarly painting and poetic contemplation of the sublime landscape. The other is the Sotheby´s auction type contemporary scene, where sky-high prices and artistic egos dominate.
Contemporary art has thrived in part because it almost by definition reaches only an elite few. Other forms of traditional art had to glorify the state, artists of all types faced ostracization and all art that had remotely political connotations involved strict censorship. However, the success of contemporary art is also due to the persistence of a handful of artists and to the party’s willingness at least to let some sectors off the leash.
Globally, the recent rise in Chinese living artists’ fortunes has been unprecedented. In 2004, only one Chinese artist (Zao Wouki, a traditional painter at ninth) was among the top ten best-selling artists. By 2007, apparently, five of the ten best-selling living artists at auctions were Chinese-born, led by Zhang Xiaogang, whose auction sales totaled $56 million. This artist often paints huge canvasses, which could lead us to believe that some Chinese patrons may have been buying paintings by the square foot in order to cover the walls of their palaces.
Observers at all these auctions take a headcount of Chinese participants in order to be sure that it is not just Chinese selling to Westerners and that Chinese are actually buying too. Auctions are the most reliable barometer of the recent fad for Chinese contemporary art and the global financial meltdown hit them hard.
In the October 2008 Sotheby´s autumn auction of Chinese contemporary art sales were dismal by comparison with the October 2007 result, with some works even going unsold. As if that was not bad enough, experts say the contracting market was also affecting major collectors, who had been hoping to sell off expensive works of art in 2009. In this way, the crisis caught the entire art food chain from artist to final long-term collectors, who were concerned that their art investment values may have evaporated. Even the artists who have benefited most from this country’s rising profile as an arts center were still living in luxury pads and driving top of the line cars. May the image of the hard-up artist in his draughty atelier rest in peace.
A crucial test is facing the small number of international galleries that opened in Beijing, Shanghai and even Caochangdi Village (located on the northeastern outskirts of Beijing) in recent years, in the hope of riding the wave while also getting closer to Chinese artists. One of the main problems is with the valuation of Chinese art after the collapse of the market. Sotheby´s has first hand experience of this rollercoaster. In its pre-global collapse Spring 2008 auction, the masterpiece was the Estela collection called “the most important collection of contemporary Chinese art to ever come to market” and which raised $52 million. This caused a kerfuffle when artists, dealers and curators said they had been hoodwinked into selling on the cheap to a rich collector who was supposedly putting together a permanent collection, which would immortalize the artists. It turned out that the buyers were NY investors who quickly cashed in by selling the works to a Manhattan dealer. In a slick art version of a Wall-street type financial arbitrage transaction, he then sold them through Sotheby’s. Crying all the way to the bank, some of the artists thought they were entitled to an additional piece of the action.
This incident brings out the buoyancy of the market for Chinese art just before the global slump and shows once again that the art market is the first to collapse and the last to recover. In today’s market, those same participants may be glad just to unload their paintings at a decent price with no other expectations. The Spring 2009 auction starkly revealed the state of the market, which actually made Sotheby´s charge for coffee, not even providing seating around the coffee bar, and refrain from putting on the usual art lecture sideshows (seen as essential for getting the uninitiated rich into the art bidding game). In the meantime, they say that Chinese buyers are sustaining not just the present level of the Chinese art market but also the South-East Asian art market as a whole.
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Graduate Degree in Economics from London University and in Finance by the British Institute of Bankers. With 39 years of experience in capital markets in Brazil, Europe and USA, he was an Executive Director in several banks. He is the Director of Investments of Astra Investimentos Ltda, an independent fund asset manager and CEO of Barham Financial Services, specialized in preparing companies for Private Equity investments. |
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