An Art Market Bubble Chinese Style Pt. 3 – artmarketblog.com
It seems that most people associate an art market boom with a sudden and rapid increase in the prices being paid for works of art combined with an increase in the number of works of art being sold on either a market-wide scale or within a particular sector of the art market. Applying this definition to the current progression of the Chinese art market leaves no doubt that we are in the midst of a Chinese art market boom. This is all well and good, but what happens when the boom ends?
Only four years ago in 2007 the art market experienced a period of Chinese domination, similar to that which we are experiencing now, that ended abruptly at the beginning of 2009 thanks to the global financial crisis. As a result of the bust a number of Chinese galleries were forced to close and a large number of contemporary Chinese artists were dropped by galleries then were left to fade into obscurity. Because galleries and dealers failed to properly nurture and cultivate the careers of the young Chinese contemporary artists who were swept up in the boom, these artists did not have the experience or level of career development that they would have needed to survive the bust.
After the demise of the Chinese art market boom in 2009, galleries and dealers admitted that they had made mistakes and said that they would act more cautiously in the future and properly nurture artist’s careers. The question is, has this occurred? As far as I am concerned there is more than enough evidence to suggest that the same problems are recurring this time around. Ill prepared young contemporary artists are still being flung into the limelight in a market that has an underdeveloped gallery and dealer network which cannot support the long term careers of all the artists involved in this boom.
An art market boom is almost always treated as a positive event regardless of whether or not the boom will end positively for the market and for the artists involved. As an art market analyst my primary concern is what the outcome of the boom will be – because all booms have to end at some stage. There are generally two ways that a boom can end. The first is what we know as a bust – or in other words a sudden and rapid decrease in the prices being paid for works of art and the number of works being sold. The second option is the most favourable and involves a stagnation of prices and the number of works being sold as opposed to a massive drop in prices and the number of works being sold.
In order for prices to merely stagnate at the end of art market boom there would have to be significant evidence that the prices being paid during the boom were in some way justifiable. This is not such a problem for works by historic and modern masters that will always be in high demand, and for which higher prices are more easily justified. History has shown that the historic and modern masters are relatively resilient even after a drop in prices as a result of a major negative art market event. To justify paying higher prices for works by contemporary artists whose work increased in price during the boom is much more difficult and would require some sort of career progression involving the sort of curatorial and critical recognition that adds true value to an artist’s career. Young emerging contemporary artists who do not have the experience and reputation to justify the prices that have been paid for their works during a boom are often just completely forgotten once prices for their works plummet. Without the reputation and desirability that they would have needed to survive the negative fallout from the massive drop in prices that their work experienced, many young emerging contemporary artists end up fading into obscurity once an art market boom ends.
In my opinion the most damning evidence of a bleek future for the Chinese art market is the direction that China’s property market is heading. What China is doing is boosting their economy by building massive cities in anticipation of the massive rise in the number of Chinese people who can afford to purchase their own home that the Chinese government thinks will take place. The problem is that many of these cities remain empty long after construction was completed and offer no signs of filling up with people. Commenting on China’s property market, a recent article by Bloomberg stated that: “China’s property market may be heading into a bubble as the economy’s reliance on real estate reaches a level close to the housing peaks in the U.S. and Japan, according to Citigroup Inc.”. This statistic from Bloomberg is particularly relevant because it compares China’s property market boom to the Japanese property market peak – the collapse of which caused the art market collapse of the early 90′s. With so much money being invested in property and being made from China’s property boom it is highly likely that a significant proportion of the money being spent by the Chinese on antiques and fine art comes from the property boom. It is therefore also highly likely that the ability to pay any debt that Chinese buyers are racking up to pay for their trinkets is reliant on the continued positive progression of China’s property boom.
All the evidence that I have come across points to a negative end to China’s art market boom at some time in the near future. I do, however, also believe that China has the money, power and resources to continue the current rate of art market progression for a while yet. How long they can maintain the momentum remains to be seem.
See part 1 here:
http://www.artmarketblog.com/2011/05/03/an-art-market-bubble-chinese-style-pt-1-artmarketblog-com/
See part 2 here:
**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications
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