June 12, 2008 / 12:27 AM / 10 years ago

Chinese art may face bubble trouble as prices soar

BEIJING (Reuters) - When Chinese artist Yue Minjun sold his painting “Gweong Gweong,” inspired by the bloody Tiananmen Square crackdown in 1989, he received $5,000.

<p>A visitor views paintings by Chinese artist Shen Jingdong titled "Hero No. 12" (L) and "Hero No. 17" (R) at an art gallery in Beijing in this December 4, 2006 file photo. REUTERS/Claro Cortes IV/Files</p>

That was in 1994. Fourteen years later, the painting of toothy men dropping like missiles from war planes over Tiananmen, fetched $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 $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 website Artron (www.artron.net). But Artron registered a 4 percent drop in prices for their works in the past half year.

Avoiding a stomach-churning drop for Chinese art may depend on the appetite of buyers in Shanghai and Beijing.

“The only way the market is sustainable is if there’s enough wealth here and China wants to buy China (art),” Moses said. “That is, you can’t have a great contemporary collection without having a Yue Minjun. If that’s the case, then it will continue.”

Yue’s trademark of maniacally grinning men has become a staple of contemporary Chinese art collections. Some find his paintings repetitive or facile, but Moses noted that similar criticism has not dented prices for Andy Warhol’s work.

“If this is the current Warhol, if this is the rule of thumb, then this is quality,” he said. “It doesn’t matter if you find it boring.”

The success stories of Yue, Zeng Fanzhi, Liu Xiaodong and others have left young artists with dollar signs in their eyes. Just out of college, they are demanding very high prices for untested works, an indication of a bubble, Sotheby’s Zhang said.

“There’s no validation from curators. The valuation is problematic,” she remarked.

Investors face added uncertainty because of China’s reputation for fakes and poor authentication. Workshops near Hong Kong, known for reproductions of Western art, have started giving the same treatment to their native arts. Knock-offs may be seeping into the market.

Accusations have also been leveled that Chinese investors throw money behind young artists, then bid up their prices and cash out.

MONEY SCENE

Flourishing arts are still relatively new to modern China.

The country’s rich painting and ceramics traditions gave way to socialist realism after the Communist revolution in 1949. In the 1980s, as the government threw itself into economic reform, space opened for artists and they began to push the boundaries.

Their experimentation has delivered a rich bounty, best captured at Beijing’s 798, a warren of thriving galleries in an old industrial estate built by East Germany.

Yet there are laments that rocketing prices have distorted the scene.

“In the past, there were lots of pure collectors,” said Dong Guoqiang, chairman of Council International Auction in Beijing, a somewhat odd job for a critic of what he sees as the culture of ROI, or return on investment.

“That practice of collecting art as art has disappeared. People are focusing more on investment and ROI than the joy of art,” he said.

The seemingly insatiable demand for Chinese contemporary art has catapulted Hong Kong into third place among the world’s auction centers behind New York and London.

Jerome Sans, director of the Ullens Center of Contemporary Art, a non-profit art centre in Beijing, thinks it sad that the soaring prices garner so much attention, reducing the actual content to little more than an afterthought.

Yue and his peers offer a lens on China’s breakneck economic development and the pollution, corruption and repression intertwined with it.

“Chinese artists capturing this transitional period in an original, critical way. Their work will still be very interesting in a couple of decades,” Sans, an art industry veteran, said.

With a wave, he dismissed the idea that the market is a fragile bubble.

“Once Chinese collectors start to collect intensively, it will not end soon,” he said. “It’s the explosion of a new era here, so what we see, I think, is just a little start.”

Additional reporting by James Pomfret in Hong Kong

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