The Chinese art market, once a dominant force in global auctions, is experiencing a significant downturn. A key indicator of this shift is a sharp increase in unpaid bids, particularly for high-value artworks. This trend reflects broader economic challenges in China and a change in collector confidence.
Key Takeaways
- Half of high-value art lots in China go unpaid.
- Sales in mainland China fell 38% in 2024.
- Economic slowdown and corruption crackdowns impact buyer confidence.
- Major auction houses face challenges after expanding in Hong Kong.
- Capital controls make offshore payments difficult for Chinese buyers.
Chinese Art Market Faces Economic Headwinds
The Chinese art market is currently in a difficult phase. Data from the China Association of Auctioneers shows a concerning rise in the number of art pieces that are successfully bid on but never paid for. This issue is particularly noticeable for more expensive items. In the year leading up to May 2024, nearly 50% of lots sold at auction for more than Rmb10 million (approximately $1.4 million) remained unpaid by the reporting deadline. This represents the highest proportion of unpaid bids outside the COVID-19 pandemic period since at least 2012.
This trend points to a significant shift in the behavior of Chinese art collectors. For many years, China's economic boom created a large group of wealthy individuals who actively participated in and often dominated global art markets. These buyers generated substantial commissions and profits for auction houses worldwide. However, current economic conditions in China, combined with increased scrutiny of lavish spending and an ongoing crackdown on corruption, are altering this dynamic.
Fact: Declining Sales
- In 2024, auction sales in mainland China dropped by 38% year-on-year.
- China now ranks third in the global art market, down from higher positions.
- Sales at major auction houses like Christie's, Sotheby's, and Phillips in Hong Kong decreased by 30%.
Collector Confidence Wanes Amid Economic Pressure
Jiao Qinghua, a prominent art collector from China's eastern Jiangsu province and a veteran of the coal industry, expressed his concerns about the market. He believes the mainland Chinese art market, once characterized by strong growth, has entered a downward spiral. He is unsure when it will recover. According to Jiao, before 2015, all segments of the art market, including paintings, porcelain, antiquities, and Chinese furniture, performed well. After 2015, purchasing power began to be restricted. The pandemic further reduced buyer confidence, leading to both lower sale prices and an increase in unpaid transactions.
"The economy is declining and the pressure is high. A lot of bosses and entrepreneurs used to dare to buy. Now they don’t dare to buy because they have no confidence."
— Jiao Qinghua, Art Collector
The economic slowdown has left many in the art world questioning the future. Collectors, art advisors, and auction houses are all wondering if the immense wealth that fueled the Chinese art market for two decades is diminishing. They are also seeking answers as to why so many winning bidders are failing to complete their purchases.
Historical Context: The Rise of Chinese Buyers
In the mid-2010s, wealthy Chinese individuals made headlines with extravagant art purchases. For example, in 2013, Wang Jianlin, then China's richest man, bought Pablo Picasso's "Claude et Paloma" for $28.2 million. In 2015, Liu Yiqian, a billionaire stock trader, acquired Amedeo Modigliani's "Nu Couché" for $170.4 million. These purchases highlighted the growing influence of Chinese buyers.
Shift from Trophy Buying to Caution
Patti Wong, former Asia and international chair at Sotheby’s, observed a dramatic change over the years. In the 1990s, Asian buyers represented only a small fraction, possibly 5%, of Sotheby's total turnover. By the time of the COVID-19 pandemic, Hong Kong accounted for about a third of Sotheby's business, largely driven by Chinese collectors.
Initially, Chinese buyers focused on ceramics and Chinese artworks in the early 2000s. By 2011, Chinese artists like Zhang Daqian and Qi Baishi surpassed Picasso in annual sales value, with 10 of the top 15 most sought-after artists globally being of Chinese origin, according to Artprice data. Later, Chinese tycoons turned their attention to Western blue-chip art, viewing it as a "catching-up game" and an opportunity for "trophy-buying" to make their mark on the international scene.
This desire for international recognition made them highly competitive. Wong noted that they enjoyed the excitement of competing on a global stage, seeking to acquire prestigious artworks. While auction sales in Hong Kong and from Chinese buyers began to moderate around 2015, Asian buyers still bid on at least half of the most expensive lots globally each year until the pandemic, indicating exponential growth in their market presence.
Auction Houses Grapple with Unpaid Bids
Despite the current challenges, some auctions still show signs of activity. At a recent Shanghai Council spring auction, several Chinese ink paintings, such as Xu Beihong’s “Double Happiness Arrives at the Door” (1947) and Wei Zixi’s “Autumn Heights of Qixia” (1992), sold for prices exceeding their upper estimates. However, art market insiders noted that many lots sold for significantly less than their past values. For instance, a rooster painting by Xu Beihong sold for Rmb850,000, while a similar work by the same artist had previously fetched over Rmb10 million.
Jiao Qinghua, the collector, confirmed this cautious sentiment. He attended the Shanghai Council auction but did not purchase any works. He stated that many important collectors are hesitant to sell their valuable pieces, reflecting a strong sense of market caution. He also experienced the problem of non-payment firsthand when a work he sold at auction in Beijing in April was never paid for, forcing him to re-sell it, likely at a lower price.
The issue of unpaid works extends beyond individual collectors. Auction industry experts and participants are puzzled by the consistently high level of incomplete transactions, and why some Chinese auction houses continue to deal with clients who fail to pay. Major Chinese auction houses have not commented on this issue.
- One theory suggests that some auction houses might register bogus sales to generate hype for an artist.
- Another factor is China's legal environment, which can make it difficult and time-consuming to pursue non-paying buyers.
- Smaller auction houses may also be reluctant to disclose failed sales to avoid damaging market sentiment.
Hong Kong: A Hub Under Pressure
During the pandemic years, the strength of Chinese wealth led major global auction houses like Sotheby's, Christie's, Phillips, and Bonhams to invest in larger, more luxurious headquarters in Hong Kong. Hong Kong's status as a semi-autonomous territory, with a freely convertible currency pegged to the US dollar, no capital controls, and fewer restrictions on cultural heritage imports/exports, made it an attractive hub for Chinese and international buyers alike.
However, the timing of these expansions proved challenging. By the time Christie's opened its new Hong Kong headquarters, Asian (predominantly Chinese) buyers' contribution to its global auction sales had fallen to 21%, down from 39% when the plan was announced in 2021. Sotheby's also faced layoffs and cutbacks.
This downturn in the art market mirrors broader economic struggles in China. Years of strict lockdowns and pandemic controls severely impacted economic growth and consumer confidence. The ongoing crisis in China's property sector, a significant driver of wealth for decades, has also led many wealthy individuals to question the country's economic stability.
Future Outlook: Uncertainty and Opportunity
Clare McAndrew, founder of Arts Economics, which produces the Art Basel/UBS Art Market Report, noted an initial surge of "revenge spending" from Chinese buyers in early 2023 after COVID-19 restrictions eased. However, this spending began to decline in the latter half of the year. Last year, economic weakness continued to hinder Chinese buyers, leading to sharp drops in sales in both Hong Kong and mainland China. This was partly due to consignors being unwilling to sell into a falling market. McAndrew emphasizes that uncertainty remains, stating, "All the issues that we’ve had are still around... Art is not immune."
Despite the challenges, some collectors see the current climate as an opportunity. Xie Wenwei, owner of Guangzhou-based antiques dealer Man Po Chai, believes now is a good time to buy. Chinese antiquities have been particularly affected by the slowdown in luxury spending, as pieces within China generally cannot be exported, tying the domestic market closely to the country's economic health. Sales in this sector have been muted since 2018.
Xie acknowledges the difficulties, especially in Hong Kong, where stricter capital controls affect transactions. "If your money is onshore it will be very difficult... It will definitely affect business at Hong Kong auction houses," he explained. While smaller payments might be acceptable, transactions involving tens to hundreds of millions of Renminbi are "very difficult." However, he remains optimistic, citing government efforts to promote cultural industries. "Speaking optimistically, the economy could recover next year," he said, adding, "Time to stock up."
Jiao Qinghua agrees that prices have fallen enough to present bargains, but he remains concerned about the non-payment issue. He directly links this to the overall economic performance. Data from the Art Basel/UBS report shows a clear inverse relationship: the rate of uncompleted transactions surged during the pandemic, briefly improved after the post-COVID bump in 2022-23, and then rose sharply again in the 12 months to May of last year. "There are lots of non-transacted works now," Jiao stated. "All people in the auction industry have experienced this."
Western auction houses typically have stricter requirements for new bidders, including hefty deposits or proof of funds for expensive lots, resulting in significantly lower rates of incomplete transactions. However, they also face challenges with mainland Chinese buyers due to Beijing's strict capital controls, which limit the amount of money citizens can transfer out of the country to $50,000 per year. Industry figures indicate that getting money out of China for offshore auctions has become harder since 2018, with previous workarounds like using bank cards for discretionary spending being curtailed.
A former senior auction executive in Hong Kong emphasized the strictness of their payment policies: "We are very strict on this: the last thing we want is that something is sold but it’s not being paid." New bidders for high-value items are required to prove their funds by paying offshore deposits.
For Jiao, the reason for non-payment is simple: "A lot of people don’t pay when the economy isn’t good. They don’t want to take their money out of their pockets." While he sees current conditions as an opportunity for bargains, he remains cautious about the long-term outlook. "We don’t know where the bottom is."