As of January, it had rocketed up 583 percent from five years earlier, according to an index by the auction tracking site Artprice. But, like so many other markets, it was driven by speculation and greed. And now, that bubble has burst.
In September, the doors of the SH contemporary art fair in Shanghai had been open just five minutes when a Chinese businesswoman bought an oil painting from Yan Qing's Aye gallery for $40,000.
An abstract work by artist Wang Guangle, it was a blocky, black square with thin white lines straggling across a canvas, bisected with a thick white stripe.
Gallery owner Yan Qing was confident it was a good buy.
"It's not cheap, but the buyer liked it a lot and is very decisive," she said at the time. "For good artworks, I don't think it's a bubble; they won't devalue. Each one is an original, so they can only rise in value."
SUNRISE
Factors Contributed
Soaring Prices
The total value of contemporary Chinese art sold at auctions has grown from less than $1m in 2002 to $167.4m in 2010, according to figures from art-market advisory company ArtTactic.
"And this figure could easily be double if you take account pieces sold through galleries and art fairs," said ArtTactic managing director Anders Petterson.
The Christies evening sale of Asian 20th Century and contemporary art raked in 484 million Hong Kong dollars, an increase of 74% from a similar sale in Autumn 2010.
In April, a three-panel oil painting by Zhang Xiaogang sold in Hong Kong for 79 million Hong Kong dollars - a record auction price for Chinese contemporary art.
And knock-offs of pictures by artists such as Yue Minjun in tourist markets in China and Hong Kong are also testament to the market's rising popularity.
Blistering Pace
It is not just the big hitters such as Zhang Xiaogang, Zeng Fengzhi and Ai Weiwei that are seeing the value of their art soar.
Even relatively little known Chinese artists are seeing the prices of their work rise sharply.
"The speed of everything is quite frightening," said Alistair Hicks, an art adviser and curator for Deutsche Bank.
"As a collector, you can blink and miss the moment."
Mr Hicks said Deutsche Bank had planned to buy a photographic collage by Shanghai-based artist Yang Yongliang, on display at the Hong Kong International Art Fair, but at $40,000 the price sought by the gallery was now too high.
He said the bank had bought a similar, albeit smaller, piece by the same artist a year ago for a fraction of that price.
This blistering pace of growth has prompted talk a bubble might be forming similar to that seen in the market for Western contemporary art in 2008, before the financial crisis.
"People are not turning into passionate collectors overnight," said Mr Petterson
"It is a result of new, investment-orientated money flowing into the art market."
For China's freshly minted millionaires and billionaires looking to spend their wealth, art is a natural choice.
Lacklustre returns on the country's stock markets and limits on the property market, make more traditional investments less appealing.
At least three Chinese financial institutions have set up funds investing in Chinese art, evidence of the newfound interest in art as an asset class in China.
Richard Chang, a New York-based hedge fund manager and collector, said he regarded his contemporary art collection as a hobby, but added: "No collector wants to lose money.
"When a nation is very wealthy and there's a lot of growth, oftentimes the art market goes along for the ride," he says.
Others say talk of a bubble is premature.
"There is a difference between speculation and investment," says Magnus Renfrew, ART HK's fair director.
"The prices we are seeing at the moment are underpinned by curatorial and critical acclaim."
Many Chinese collectors favour traditional and classical art forms by artists little heard of in the West, despite the high prices their work commands.
A picture by the artist Qi Baishi painted in the 1940s was sold at an auction in Beijing for more than $65m.The picture depicts an eagle on a pine tree, flanked by calligraphy.
"We are now reaching prices that even Picassos are struggling to get," said Mr Petterson.
Chinese collectors have been more wary of buying pieces by the more avant-garde artists, championed by Western collectors such as Charles Saatchi and Uli Sigg.
Signs are this is beginning to change, although there remain artists such as Ai Weiwei and Cao Fei that still only have a high profile in Western art circles.
Of the top 10 lots at the Christies evening auction in May, nine were bought by Asian companies or individuals.
This trend should make the current boom in Chinese contemporary art more sustainable, said Mr Hicks.
"To a certain extent, you are always going to have a greater affinity with art from your own culture," he says."The most likely person to spot and support a rising star is someone who shares, at least in part, their cultural background."
SUNSET?
The Real Reasons
In the last October, as crisis after crisis buffeted Wall Street, Sotheby's sale of contemporary Chinese art bombed. Just 39 of 110 paintings sold at the auction, which is widely seen as an indicator of the health of the Chinese contemporary art market.
Since then, things have gotten even worse, according to Brian Wallace of Red Gate Gallery in Beijing.
"In terms of the overall market, I would say it's probably dropped by at least 50 percent, just in this short period, and we'll see how that pans out over 2009," says Wallace, an 18-year veteran of the China art market.
Wallace blames a combination of factors, including the financial crisis, a falling number of visitors to galleries, and the reality that, because of the bubble, perhaps prices were too high.
"We all knew that was going to end, but we weren't expecting it right now," he says.
When asked how much further the market will fall, Wallace laughs nervously. "We don't know, because we haven't had this experience before," he says.
The Chinese Contemporary Art market was a warning sign for the conduct of the entire Chinese investment economy.
In the contemporary art market, China’s "pay-for-play" culture was a perfect match for the self-dealing ethos of the art world. Top Chinese artists were mass-producing paintings in almost assembly-line fashion, selling them directly out of their studios in unknown quantities for up to hundreds of thousands of dollars apiece. Auction houses were working with lesser-known artists, galleries and dealers to bid up their works and set a good public price for private sales.
Artists routinely paid critics for praise and museums for exhibitions to build up their brands. Want to get prime show space at a top national museum? Artistic merit is nice, but money talks. Want the cover of an art magazine, or a lengthy article inside? That is all for sale–and still is, but presumably at a deep discount now.
The game is up, but for those who got in early enough and got out, the money’s been made. “That whole Chinese collector cartel, it was kind of like a big Ponzi scheme,” says Philip Tinari, an art critic and curator in Beijing. People kept recruiting new buyers to pour more money into the market, driving up prices. “It was quite clear what it was.”
The declining trend will continue. First, the bubble that built up in the contemporary Chinese art industry before the global equity crash has passed. Asian contemporary art prices are back to 2006 levels, according to an ArtPrice report, making investment more affordable and hinting at room for a recovery in prices in the future. Longer term, the industry is likely to thrive in China because the country has a fascination with art as a part of its heritage. Today Chinese from all walks of life are seeking to find new meaning from a rich and varied ancient culture that includes paintings and calligraphy. The government, in turn, is promoting the longer-term development of a contemporary art industry.
The number of contemporary Chinese art collectors is also likely to grow because of Asia’s rising economic clout. As wealth expands, the investing population – and hence, the demand side of the market – will increase with it. “It is the explosion of a new era here,” says Jerome Sanz, director of the Ullens Center of Contemporary Art. “What we see is a little start ” Relatively low entry prices for contemporary art allow for great returns; they also have the intellectually satisfying benefit of allowing collectors to discover a realm that is relatively unknown in the art world with little cash down.
Conclusion
Beijing's 798 Art District is one victim of the slowdown. A motley assortment of artists, galleries and cafes sprang up among the warehouses of an old electronics factory in northwestern Beijing, making it the capital's premier art destination.
Local press reports say that 37 art galleries have closed down in the district within the past few months.
"They say the rent's too high," says Duan Changwu, who owns a kiosk selling drinks in the district, pointing to a row of padlocked galleries. "Because of the financial crisis, they can't sell any pictures."
Insiders say there has been an exodus from Beijing by artists from the provinces, who'd been attracted to the capital's vibrant art scene — and its money-making possibilities. Now, with their finances pinched, many are packing up and going home.
Art galleries and museums that remain open are cutting back drastically on their shows to save money. According to a recent survey by the art market research firm ArtTactic, 72.7 percent of respondents have a negative view on the short-term outlook for the Chinese contemporary art market. But despite the gloom, not everybody is pessimistic.
"The financial crisis is a good thing for Chinese contemporary art," says artist Pu Jie as he draws on a cigarette, while admiring his towering, sunflower-yellow canvases.
The 50-year old, whose work has sold at Sotheby's for tens of thousands of dollars, is busy preparing for two solo shows this year: one in Tokyo, one in Beijing. He has been painting a 60-foot-long series of panels of yellow-tinted, apple-cheeked revolutionary women, overlaid with cartoon-like, partly clad, thoroughly modern madams.
"Everybody was busy doing exhibitions, selling pictures, doing deals with galleries. Everybody was playing the market instead of thinking about the essence of art," he says. "Now, the economic crisis should make us think soberly about what sort of art we are making."
Even as the Chinese contemporary art market reached ever more dizzying heights, its fundamentals were shaky. Tales of dirty dealing by artists were legion; some artists bought back their own works at auction to push the prices up; others secretly offered "buy one, get two free" deals at auction; some even signed contracts with middlemen, paid to inflate the price of their art.
ArtTactic has a "speculation barometer" measuring the perceived level of speculation in an art market; the level for the contemporary Chinese market was 73 percent higher than for the Western contemporary art market.
Independent curator Zhu Qi believes up to 80 percent of transactions in China were "fake" or pumped up. For some artists, making money began to take precedence over making art, he told NPR in an interview recorded late last year.
"Artists don't even have time to paint," Zhu Qi said. "They employ others to draw for them, then they just sign the pictures.
"In the late '80s, art criticized social realities, but those critical voices no longer exist. Now, the older artists are all stars and millionaires. And younger artists think it's better to simply turn art into a concrete, tangible commodity. They don't care about history and society, they just care about themselves."
It sets an alarm and is right time for artists to 'Get Back To Basics'
Yan Qing — the gallery owner who sold a painting within five minutes at the Shanghai art fair last year — is actually opening an enormous new space in Beijing named Aye Eastation.
The 10,000-square-foot gallery will be filled with works by artists who had been the brightest stars in the contemporary art firmament, such as Zhang Xiaogang, Fang Lijun and Yue Minjun.
"We're not giving in," Yan Qing says. "We're running against the tide."
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