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BEIJING (Reuters) - The Chinese art bubble has burst. Long live Chinese art!
Or so seems to be the refrain of artists and galleries in China, where prices are sagging after a decade when the country's contemporary paintings were the hottest segment of a booming global art market.
Yue Minjun is among those with a distinctly unfurrowed brow.
His trademark paintings of men with outlandish grins went unsold at auctions last autumn, months after similar works fetched millions of dollars in feverish bidding.
"There are some who think that in this kind of market, art will sooner or later be finished. That's a very pessimistic view," Yue said. "This is nothing to be afraid of."
Puffing on a cigar outside a Beijing gallery, he described the emergence of serious Chinese collectors, a tectonic shift that could put China's art on a solid footing for decades to come.
"At first, people might have thought of art like stocks," he said. "But they have discovered art is more than just a stock investment. It has more significance and they are getting deeper into it."
In the short run, though, Chinese art more closely resembles the U.S. housing market, with prices driven down by questions about quality and oversupply.
The outside world's fascination with Chinese contemporary art, particularly in its depictions of Communist repression and crass commercialism, had driven prices to dizzying heights.
Yue was emblematic. His painting "Gweong Gweong," a macabre take on the Tiananmen crackdown in 1989, sold for $6.9 million last May. He had received only $15,000 for it 14 years earlier.
The shock of seeing works by Yue and his big-selling compatriot Zeng Fanzhi fall short of minimum prices at auctions last autumn was echoed by a collapse in gallery sales.
"It used to be that if you just staged an exhibition, you'd be able to make some sales. These good days couldn't continue," said Guo Xiaoyan, curator of the Ullens Center of Contemporary Art, a non-profit gallery in Beijing.
But Guo is not grieving the end of that heady era.
"Artists were pushed by the market if it said it only liked a certain type of their art," Guo said. "A flourishing market and a flourishing art scene are not necessarily related."
Critics have long disparaged a certain sameness in Chinese contemporary art, where less established artists imitate the themes of their successful peers, who in turn endlessly replicate their own most popular themes.
That did not deter buyers in the past.
Auction prices for China's 18 hottest artists soared 13-fold from 2003 to 2007, Chinese art website Artron (www.artron.net) estimated. And commercial galleries, small and large, mushroomed in Beijing and Shanghai.
Then came a crash in the Chinese stock market and the global financial turmoil.
Chinese art prices fell about 28 percent last year, according to Artron, and galleries have cut staff, reduced exhibition space or even shuttered their doors.
Red Gate Gallery, one of the original contemporary art galleries in Beijing, closed its branch in the city's 798 art district, saying that property managers were demanding unreasonably high rents as if the market was still sizzling.
"Certainly, there was a bubble and everybody thought it might take a couple more years for it to burst, but the crisis brought it on, so there's going to be a big shake-up in the industry," Brian Wallace, director of Red Gate, said.
"Some lesser quality galleries will go, some of the artists who really shouldn't be in galleries will go as well, and the people at the top end, their prices will settle down," he said.
Despite the troubles, Wallace said Red Gate's sales in the first quarter this year were on par with the same period last year, a sign that the worst may already be past.
Mei Jianping, a finance professor and co-creator of the Fine Art Index, a measure of mostly Western art market performance, drew a parallel between Chinese art and the economy.
China's economy has been buffeted by the financial crisis, with growth slumping to a seven-year low, but most analysts think that deeper trends of urbanization and industrialization can power strong expansion in the long term.
Likewise, Mei said, fundamentals are bullish for Chinese art.
"There are more and more people joining the collector crowd, so demand is growing as we speak," he said.
"Before people were just concerned about having four walls and a roof on top of them. Now they are saying, if we have a villa, we cannot actually have a wonderful multi-million-dollar home with bare walls," Mei said.
The vision of a China with private collections and public galleries to rival those in the United States and Europe is beguiling.
But day-to-day needs are more pressing for young artists such as Liu Gang, 26, a photographer trying to break into the scene with his absurd blow-ups of Chinese real estate advertisements.
"There aren't as many galleries out there. And those that are around aren't looking to sell new work for now," he said.
Liu was given a solo exhibition in March, a big honor for an artist just out of school, but said he had yet to make any sales.
"I just depend on myself, or I borrow a bit from my parents to keep on doing my work," he said.
Reporting by Simon Rabinovitch; Editing by Megan Goldin