Art market in China weakening

The art market in China had been booming over the last half-decade or so. The boom is a sign of creation of wealth in China, and in other parts of the world. It looks like the art market is starting to show signs of a bust. My impression is that a lot of art investors are wealthy speculators so it is not surprising to see the Chinese art market weaken.

As China's decades-long economic boom cools, one clear sign of changing times is falling demand for contemporary art.

For years, Chinese contemporary was one of the hottest tickets on the international market, making the fortunes of many Chinese painters, sculptors and photographers. Celebrities such as Hollywood director Oliver Stone and top British art collector Charles Saatchi paid millions for works by big-name Chinese artists.

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Reports in the Chinese press say that more than 30 galleries in Beijing's trendy 798 art district have closed their doors. Less than half the Chinese 20th century works put up for auction by Christie's in November were sold. A survey last month by art market research company ArtTactic showed that most buyers and sellers thought prices would fall further before rebounding, with pessimists outnumbering optimists six to one.

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Art was not the only bubble sent soaring by the China wave. The Shanghai stock index rose to more than 6,000 from 1,000 between 2005 and 2007, then dropped half its value in six months. The price of a famous blend of tea, pu'er from southwest China, saw its value rise tenfold to $150 a pound before collapsing in 2007. Apartments in one luxury development in Shanghai went on sale in 2005 for $16,000 a square metre.

But art was among the biggest bubbles, with prices rising nearly sevenfold over the past five years as foreigners and well-heeled Chinese looked for big returns.

My guess is that if China becomes the largest economic power in the future, its art will rise in value. It might even outperform the Chinese stock market. This is clearly why a lot of foreigners seem to have been buying heavily. But, like all booms, the Chinese art market may have reached an irrational exuberence stage and is collapsing now. Overall, though, I think the art investors will do really well if China becomes wealthy.