Under the hammer

Chen Hongsheng, pictured right, at the time of Poly Auction’s IPO

Plenty of A-listers were to be seen at Art Basel Hong Kong when the art fair opened last Friday. Collector Ulli Sigg, Tate director Nicholas Serota and Alibaba founder Jack Ma were spotted in the crowd at the exhibition. There was also an event organised by AIDS research charity amfAR to coincide with Art Basel, with celebrity attendees including the likes of Gwyneth Paltrow, Kate Moss and Victoria Beckham.

While Art Basel has become a prominent annual event in Hong Kong, auction houses in China are said to be struggling. Take Poly Culture. The company, touted as China’s answer to Christie’s and Sotheby’s, has seen its shares drop steeply over the last year.

Shanghai Securities Times reckons that Poly Culture chose “the perfect time” to go public – though not if you were an investor. At the time of the offering, its IPO was oversubscribed 90 times by retail investors, raising $331 million. But alas, one year on, the shares have been trading way below their IPO price of HK$33 ($4.25), hovering around HK$24 – well below their all-time high of HK$42.6.

So what happened? Xi Jinping’s anti-corruption campaign has certainly affected the performance of art prices in China. Since last year, Hong Kong’s art auctions have also been in decline, with Christie’s and Sotheby’s both reporting significant slowdowns in sales.

In November, Christie’s tallied $384 million for its week-long Hong Kong auction, which represented a decrease of 21% from the previous year. Meanwhile, rival Sotheby’s totalled $371 million, down 30.8% from a year before.

“Cash-rich officials have become very discreet in buying art pieces. There has been a significant slowdown of luxury sales in China and this affects sales of artworks, too,” an industry observer told the South China Morning Post.

One Beijing-based calligrapher told Southern Metropolis Daily that he used to charge Rmb8,000 ($1,291) for a calligraphy piece but that the price has now dropped to Rmb500. He added that many artists, even the best-known ones, have seen prices come down drastically.

“One very famous painter – he is especially popular amongst government officials – has seen his work being sold at record highs in recent years. Sometimes his paintings could fetch as much as Rmb5 million. But more recently, a lot of people have been quietly offloading his paintings. Just a few days ago, what used to cost Rmb1 million was sold for Rmb300,000. But you don’t know who the seller is. They all conduct the sale through dealers,” the insider told the newspaper.

As WiC reported in issue 222, artwork has long been used as currency for bribery. It usually works as follows: an official is given a painting as a present by a business associate. The official – most likely through a family member – then auctions it off and watches as his business cronies buy it back at an inflated price. He then pockets the cash made from the sale.

With sales of high-end artwork now in the doldrums, Poly Culture, a subsidiary of the Chinese conglomerate Poly Group, is considering a shift in strategy.

“Affected by the macroeconomic impact, the Chinese art market in the first half of 2014 is still downtrending. Buyers are exhibiting more caution… In this regard, the Group has increased the supply of lower-priced items.”

The company has indeed expanded the range of items that it now auctions. Last week, the Apple Daily reported that Poly Culture will soon be auctioning as many as 50 vintage Hermès handbags. Some of them could fetch as much as Rmb900,000 each, although the newspaper reckons that it is still a lot less than some of the rarer paintings that were previously going under the hammer.

Meanwhile, Poly is hoping a change in personnel might reverse its fortunes. Poly Culture announced in November that its chairman Chen Hongsheng will step down to be replaced by Xu Nianshan, the chairman of the parent company. It says Chen, 64, has reached retirement age. But analysts have been speculating that the move suggests that Poly Group plans to overhaul its auctioneering subsidiary.

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