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The market for Chinese contemporary art is rolling out at a feverish pace, becoming the single fastest-growing segment of the international art market. Since 2004, prices for functions by Chinese contemporary artists have increased by 2,000 percent or more, with paintings that once sold at under $50,000 now bringing sums above $1 million. Nowhere has this boom been felt more appreciably than in China, where it has spawned massive gallery districts, 1,600 auction houses, and the initial generation of Chinese contemporary-art collectors.

This craze for Chinese contemporary art in addition has given rise to a wave of criticism. There are charges that Chinese collectors are employing mainland auction houses to boost prices and engage in widespread speculation, in the same way if they were trading in stocks or property. Western collectors may also be being accused of speculation, by artists who say they buy works cheap and then sell them for ten times the original prices-and sometimes more.

Those who entered the forex market in the past 3 years found Chinese contemporary art to become a surefire bet as prices doubled with each sale. Sotheby's first NY sale of Asian contemporary art, dominated by Chinese artists, brought a complete of $13 million in March 2006; the same sale this past March garnered $23 million, and Sotheby's Hong Kong sale of Chinese contemporary art in April totaled nearly $34 million. Christie's Hong Kong has had sales of Asian contemporary art since 2004. Its 2005 sales total of $11 million was dwarfed by the $40.7 million total from the single evening sale in-may of this year.

These figures, impressive because they are, do not commence to convey the astounding success at auction of a small number of Chinese artists: Zhang Xiaogang, Yue Minjun, Cai Guo-Qiang, Liu Xiaodong, and Liu Ye. The first choice this season was Zeng Fanzhi, whose Mask Series No. 6 (1996) sold for $9.6 million, a record for Chinese contemporary art, at Christie's Hong Kong in-may.

Zhang Xiaogang, who paints large, morose faces reminiscent of family photographs taken during the Cultural Revolution, has seen his record rise from $76,000 in 2003, when his oil paintings first appeared at Christie's Hong Kong, to $2.3 million in November 2006, to $6.1 million in April of this year.

Gunpowder drawings by Cai Guo-Qiang, who was simply recently given a retrospective at the Guggenheim Museum in New York, sold for well below $500,000 in 2006; a suite of 14 works brought $9.5 million last November.

According to the Art Price Index, Chinese artists took 35 of the very best 100 prices for living contemporary artists at auction last year, rivaling Jeff Koons, Damien Hirst, and a bunch of Western artists.

"Everybody is looking to the East and to China, and the art market isn't different," says Kevin Ching, CEO of Sotheby's Asia. "Notwithstanding the subprime crisis in the U.S. or the fact that some of the other financial markets seem jittery, the overall business community still has great faith in China, bolstered by the Olympics and the World Expo in Shanghai in 2010 2010."

You can find indications, however, that the international market for Chinese art is beginning to slow. At Sotheby's Asian contemporary-art sale in March, 20 percent of the lots offered found no buyers, and even functions by top record-setters such as Zhang Xiaogang barely made their low estimates. "The marketplace is getting mature, so we can't sell everything anymore," says Xiaoming Zhang, Chinese contemporary-art specialist at Sotheby's NY. "The collectors have become really smart and only concentrate on certain artists, certain periods, certain material."

For their part, Western galleries are eagerly pursuing Chinese artists, a lot of whom were unknown just a couple of years back. Zeng Fanzhi, for example, has been signed by Acquavella Galleries in NY, in a two-year deal that exceeds $20 million, in accordance with a Beijing gallerist close to the negotiations; William Acquavella declined to comment. Zhang Xiaogang and Zhang Huan have joined PaceWildenstein, and Ai Weiwei and Liu Xiaodong showed with Mary Boone last spring. Almost every major New York gallery has signed on a Chinese artist: Yan Pei Ming at David Zwirner, Xu Zhen at James Cohan, Huang Yong Ping at Gladstone, Yang Fudong at Marian Goodman, Liu Ye at Sperone Westwater. Their works are entering private and public collections that as yet have not shown any particular interest in Asian contemporary art.

"The marketplace hasn't behaved when i anticipated," says New York dealer Max Protetch, who has been representing artists from China since 1996. "We all anticipated that the Chinese artists would go through the same critical process that occurs with art somewhere else on the planet. I assumed that some artists would fall by the wayside, which includes not been true. Each of them have become elevated. It seems like an uncritical market."

One of many key artists buoyed by this success is Zeng Fanzhi, who's most widely known for his "Mask" series. Five years back his works sold for under $50,000. Today he commands prices on the primary market closer to $1 million, with major collectors Charles Saatchi and Jose Mugrabi among his fans. Now finding your way through his first solo show at Acquavella in December, he could be considered one of the most serious artists on the Beijing scene because he works alone, minus the horde of assistants found in almost every other artists' studios in China. Still, his lifestyle is typical of this of his equally successful peers. When asked if he owns a mammoth black Hummer parked outside his studio, he answers, "No, that's an ugly car. I have a G5 Benz."

This success has blossomed under the watchful eye of the Chinese government. Movies, television, and news organizations are strictly censored, but overall, the visual arts aren't. Despite sporadic incidents of exhibitions being closed or customs officials seizing artworks, by and large the federal government has supported the growth of a skill market and contains not interfered with private activity. In the 798 gallery district in Beijing, a Bauhaus-style former munitions complex that is transformed into the capital's hottest art center, with more than 150 galleries, one finds works addressing poverty along with other social problems, official corruption, and new sexual mores. The icons of the former China-happy workers and peasants and heroic soldiers raising the red banner-are treated with irony, if at all, by the artists whose works are on view in these galleries, which are private venues generally not beneath the strict control of the Ministry of Culture.

On the eve of the Olympics, however, the government asked one gallery to postpone an exhibition until following the games. Considered unsuitable was "Touch," a show by Ma Baozhong at the Xin Beijing Gallery of 15 paintings depicting important moments in Chinese history, including one predicated on an image showing Mao Zedong with the Dalai Lama and the Panchen Lama in 1954.

The Beijing municipality spent enormous funds to renovate the 798 district before the Olympics, investing in new cobblestone streets and lining its main thoroughfare with caf�s. Shanghai, which includes benefited less from government support, now boasts at the very least 100 galleries. Local governments through the entire country are establishing SoHo-style gallery districts to boost tourism.

One individual who seems confident about the future of the Chinese market is Arne Glimcher, founder and president of PaceWildenstein, who opened a branch of his gallery in Beijing in August. Situated in a 22,000-square-foot cement space with soaring ceilings, redesigned at a cost of $20 million by architect Richard Gluckman, the gallery is in the heart of the 798 district. "We are committed to the art, and we wished to open a gallery where our artists are," says Glimcher. Adding he normally eschews the "McGallery" trend of establishing satellite spaces all over the world, Glimcher insists that it had been necessary to set up a branch in Beijing because there is "no local gallery of our caliber" with which Pace could partner. He's got, however, recruited Leng Lin, founder of Beijing Commune, another gallery operating in 798, to be his director.

Another Western dealer who has had the China plunge is Arthur Solway, who recently opened a branch of James Cohan in Shanghai. "I started arriving at China five years ago, and I was fascinated with the energy," says Solway, who wanted to introduce gallery artists like Bill Viola, Wim Wenders, and Roxy Paine to Asia but, like Glimcher, cannot find a public museum or private gallery that he considered professionally qualified to take care of such exhibitions. James Cohan Gallery Shanghai is situated on the ground floor of a 1936 Art Deco structure in the French Concession, a particularly picturesque section of the city. The building was once occupied by the military, and red Chinese characters on the entry way still exhort, "Allow spirit of Mao Zedong flourish for 10,000 years."

"From 1966 to 1976, during the Cultural Revolution, people had nothing, however now you can find spas in Shanghai and people drinking cappuccinos and buying Rolex watches-it's an incredible phenomenon," says Solway, who believes it is only a matter of time before these same newly affluent consumers commence to collect contemporary art.

Chinese collectors-or the hope that there will be Chinese collectors-are the key draw luring these galleries to Beijing. As recently as 2 yrs ago, few could name a good single Chinese collector of contemporary art. It had been a truism that the Chinese preferred to invest their money acquiring antiquities and classical works. Since that time several well-known mainland collectors have emerged on the scene.

Most visible is Guan Yi, the suave, well-dressed heir to a chemical-engineering fortune, who has assembled a museum-quality assortment of more than 500 works. A major lender to the Huang Yong Ping retrospective organized by the Walker Art Center in Minneapolis in 2005, he regularly entertains museum trustees from around the globe, who make the pilgrimage to his warehouse on the outskirts of Beijing. Now he is building their own museum.

Another noted figure is Zhang Lan, head of the South Beauty chain of Szechuan-style restaurants throughout China; she also has assembled an enviable collection and displays pieces as a result in her chic establishments. The film actress Zhang Ziyi is representative of a new class of collectors from the entertainment industry, while Pan Shiyi and Zhang Xin, chairman and CEO of the mammoth SOHO China real estate empire, have commissioned projects for his or her upscale residential properties.

Two collectors who are cheerleaders for the Beijing art scene are Yang Bin, an automobile-franchise mogul, and Zhang Rui, a telecommunications executive who is also the backer of Beijing Art Now Gallery, which took part in Art Basel in June, one of the first Beijing galleries to seem at the fair. Both of these do a lot more than collect art. They will have hosted dinners for potential collectors, organized tours to Art Basel Miami Beach, and brought friends with them to sales in London and New York. Zhang Rui, who owns more than 500 works, has lent art to international exhibitions, especially the installation Tomorrow, which features four "dead Beatles" mannequins floating facedown, created by artists Sun Yuan and Peng Yu for the 2006 Liverpool Biennial, which rejected it.

Zhang is now building a skill hotel, featuring specially commissioned works and artist-designed rooms, beyond your Workers' Stadium in the center of Beijing. "I am trying to think about ways of changing my private collection right into a public collection," Zhang told ARTnews through a translator. It isn't financially advantageous to do that in China, as no tax benefits accrue from donations to museums or other nonprofit institutions.

Zhang Rui represents the couple of Chinese collectors who are public about their activities and are building noteworthy collections. A lot more typical of buying activity in China may be the rampant speculation taking place in the mainland auction houses. There are 1,600 registered auctioneers, and their sales attract hundreds of bidders. Chinese buyers are more comfortable with auction houses, which have been running a business since 1994, than with galleries, which weren't licensed to use by the government until the late 1990s.

These auction houses run by their very own rules, generating what sometimes seems like a "wild, wild East" atmosphere. It really is, for example, fairly common for a house to obtain consignments directly from artists, who then use the sales to establish prices for their works on the primary market. More often, now that China has hundreds of galleries, dealers come to a sale with buyers in tow, publicly bidding up works to determine "record prices" and advertise their artists. This kind of bidding ring would be considered illegal in the United States, but in China it really is seen as a savvy business practice. There's little regulation of auction houses and few developed legal norms in the field, in order that even when buyers have grievances-with fakes and forgeries, for example-they usually do not feel they can resort to the law. Bidding is really a social as well as a business activity, and buyers are happy to flaunt their status by paying record prices or quickly flipping artworks, not only for profit but so they can boast of their short-term gains.

As the domestic market for contemporary art matures, however, many of these practices are getting into question. "Two years ago it was more necessary for me to bring my artists to auction," says Fang Fang, owner of Star Gallery in Beijing, which specializes in young emerging artists such as for example Chen Ke and Gao Yu. "Given that the gallery market has increased, I find it is better to keep my artists out of your auction rooms, and there is much less reason to market there."

Two mainland firms, Beijing Poly International Auction Company, and China Guardian Auctions Company, dominate the field of contemporary Chinese art. Their combined 2007 total of more than $200 million in sales represented nearly two-thirds of all auction sales in this category in mainland China for the year. Last spring Guardian achieved $142 million in sales of classical artworks, furniture, ceramics, silver, and coins, and $40 million in sales of contemporary material. The latter figure included the $8.2 million fetched by Liu Xiaodong's Hotbed No. 1, an archive for a painting sold on the mainland. In a similar selection of sales last spring, Poly sold $130 million worth of works, including $27 million in a single evening contemporary-art sale. (These figures represent hook decline for the entire year because both houses held benefit sales for Szechuan earthquake victims, raising a lot more than $20 million to aid relief efforts.)

Poly and Guardian reflect two vastly different perspectives on the domestic market in Chinese contemporary art. Guardian may be the oldest and most respected auction house in China, founded in 1993 by Wang Yannan, daughter of Zhao Ziyang, the former Communist Party leader who was simply placed under house arrest after opposing the government's usage of force against demonstrators at Tiananmen Square in 1989. If Poly is well known because of its vast resources and willingness to create deals to nab consignments, Guardian is well known because of its respected specialists and long-term client relationships. For example, once the Museum of Fine Arts, Boston, decided to sell 20 pieces of Qing dynasty porcelain in mainland China, it consigned the collection to Guardian.

The atmosphere of a sale at Poly or Guardian is surprisingly much like that in the salerooms of Christie's or Sotheby's. The catalogues are identical in design, and the bidding proceeds within an orderly, even sedate, fashion, despite the crowds of spectators in the room.

"From our beginning, we studied what the principles of an auction house should be, and we stick to these principles," says Guardian president Wang. She also serves on the board of the brand new nationwide auctioneers' association, which hopes to enforce regulations on the auction market.

Poly can be an enterprise within the China Poly Group Corporation, a $30 billion conglomerate that is the privatized branch of the People's Liberation Army. Established initially to repatriate artworks and antiquities, Poly has spent $100 million buying objects including the bronze animal heads from a water-clock fountain that were looted from Beijing's Summer Palace by British and French troops in 1860; the pieces later turned up in the West. The repatriated objects are showcased in the Poly Art Museum in the sparkling New Beijing Poly Plaza, a glass-enclosed tower created by Skidmore, Owings & Merrill.

The more freewheeling Poly is well known for practices such as for example putting up for auction works from its own collection or having consignors guarantee that they can bring buyers to the sale to meet up low estimates. Still, even here you can find signs that the marketplace is maturing and contains become very costly for casual speculators. "These collectors you are talking about are actually quite small collectors," explains Zhao Xu, senior consultant at Poly. "They bought for quite some time at very reasonable prices, however now that prices are skyrocketing, the only way they can afford to buy is to sell. The collectors that I understand already come from a higher social status, and they can afford to buy pieces worth $1 million or $2 million and so are looking for the best works, the masterpieces, to add to their collections."

When asked if Poly follows the guidelines of the Western auction houses, Zhao sharply retorts, "Sometimes even Sotheby's doesn't follow the guidelines." Or as Gong Jisui, an art-market specialist who is a professor at the Central Academy of Fine Arts in Beijing, says, "The Chinese learned this game of speculation from the Westerners who played it first."

The incident to which both men are referring is the sale of the Estella Collection at Sotheby's Hong Kong on April 9 of this year. The function reaped $18 million for 108 works. (Yet another 80 works will be up for sale this month at Sotheby's NY.) The collection was come up with from 2003 to 2006 by New York dealer Michael Goedhuis for a group of investors that included Sacha Lainovic, a director of Weight Watchers International, and Raymond Debbane, CEO of the Invus Group, an exclusive equity firm.

Last year the assortment of approximately 200 works was sold to William Acquavella, who consigned it to Sotheby's. Auction house officials will not discuss financial details, but Sotheby's had a stake in the collection. After the sale it had been widely reported that many of the artists were angered by the auction because, they said, they had sold their works to Goedhuis at discount prices in trade for promises that the collection would remain together for public display.

"The idea was to help keep the collection intact also to see it safely into some institution," says Goedhuis, who denies that any promises were made. "The ideal situation was to see it with an institution in China, because there is no such collection." The collection was published in a book, China Onward, having an essay by leading China expert Britta Erickson, and it was exhibited at the Louisiana Museum of Modern Art in Denmark and the Israel Museum in Jerusalem shortly before the sale. In accordance with Goedhuis, due to rapid rise in prices, the investors thought we would sell the collection with hopes that it could not be split up.

"Since the museums in China aren't mature enough nor are they rich enough to accomplish an acquisition such as this, my hope was that Steve Wynn would do so for his sophisticated casino complex in Macao," Goedhuis says. He turned to Acquavella because, he says, he believed the dealer would bring the collection to Wynn; Acquavella paid a reported $25 million. Acquavella director Michael Findlay laughs at the suggestion that there was any indication that the collection would head to Wynn. "I think this whole thing is surrounded by so much rumor and speculation," he says. "We bought several paintings, and we sold a group of paintings, and that's the complete story."

According to Maarten ten Holder, Sotheby's managing director for North and SOUTH USA, the firm received inquiries before the sale from several artists in the collection, wondering why the works were to be auctioned. There's disagreement about whether Goedhuis made firm promises to keep the collection together or merely made a sales page to artists that inclusion in the collection would enhance their reputations. Yue Minjun, who had two works in the sale, says no promises were made. And Goedhuis bought Zeng Fanzhi's Chairman Mao around from Hanart T Z Gallery in 2005 for the asking price, $30,000, no discount given. It sold for $1.18 million.

"You have to recognize that there was no market because of this work when I was buying," says Howard Farber, whose collection brought $20 million at Phillips de Pury & Company in London last October. Farber assembled 100 choice works by assiduously visiting artists' studios in Beijing in the late 1980s, associated with the Beijing-based critic Karen Smith, a respected author and curator in this field. A work for which he paid $25,000 in 1996, Wang Guangyi's Great Criticism: Coca-Cola, was sold at Phillips de Pury for $1.6 million. The buyer was Farber's son-in-law, Larry Warsh, who bid on several works at the sale, in accordance with newspaper accounts. "I must say i didn't actually know I was going to choose the Wang Guangyi until that moment," says Warsh. "Howard has his collection, and it's not my collection, and there were many pieces I needed from that collection that I would have wanted to buy but couldn't afford."

Many Beijing artists had agreements with Warsh to produce work with his collection and his art advisory business, which began in 2004, inspired by Farber's example in the field. "I was enamored by China, and I was enamored by the art of China as I learned all about important artists," says Warsh. "But what really hit me first was the way the pricing did not make sense if you ask me at all-everything was out of whack."

Warsh, who amassed a collection of works by Jean-Michel Basquiat, Keith Haring, and Kenny Scharf in the late 1980s, was the publisher of the now-defunct Museums Magazine, which he sold to LTB Media in 2004. He stated at one point that his collection totaled more than 1,200 works; now, he says, he owns approximately 400 paintings and photographs. Part of his collection is managed by his home based business venture, AW Asia, that includes a gallery in Chelsea and intends to put together collections of Chinese contemporary art for museums and major private collectors. The Museum of Modern Art in NY recently acquired 23 photographs from AW Asia.

With Farber and Warsh circulating in Beijing for a number of purposes, it was possible for Chinese artists to become confused about who was buying for whom and for what purpose. In recent interviews, several artists-most notably Zhang Xiaogang, who had an agreement with Warsh-pointed to him as an example of a speculator.

Warsh replies, "While some artists aren't so pleased with their decision to have sold quantities of artwork at that which was then their current values not long ago, there are numerous artists that are not resentful and also pleased that someone has taken an interest in their work."

NY dealer Jack Tilton, who spent some time working with Chinese artists since 1999, says, "Most of these artists are hoping that their work finds good homes instead of getting churned in the commercial market. But they have also played a part in this market, embracing capitalism more than we have, in funny ways. They are not naive about some of this stuff."

When asked concerning Additional hints to the sale of his collection, Farber was flabbergasted: "So what? Now I am the bad guy. That pisses me off!"

Numerous major collectors of Chinese contemporary art who've been in the field for quite a while are holding on to their collections. Uli Sigg, Swiss ambassador to China, Mongolia, and North Korea from 1995 to 1998, has built a collection of key works he has toured in the exhibition "Mahjong" to museums throughout Europe and, lately, the University of California's Berkeley Art Museum (September 10-January 4). Belgian collectors Guy and Myriam Ullens purchased their resources to establish the initial nonprofit contemporary-art center in Beijing, where they are currently exhibiting their historic collection. Up to now, collector Charles Saatchi has been hanging on to his purchases in preparation for opening his new gallery in London on the 9th of the following month with a show of Chinese contemporary art; he's got also launched a Chinese-language Site on which mainland artists can post their works.

In comparison with Western buying, mainland Chinese participation pales. Though there are lots of rumors about the power of the brand new Chinese buyers, their presence has not been felt in the major auction houses, where most of the records are increasingly being set. "Hong Kong right now covers the global buyers, especially those from across Asia," says Eric Chang, Christie's international director of Asian contemporary art. "I am not necessarily seeing mainland Chinese buyers-less than 10 percent-a drop from around 12 percent." Dealers in China also have seen few mainland collectors among their regular clients. "I don't know yet about collectors," says New York dealer Christophe Mao of Chambers ARTWORK, which recently opened a branch in Beijing.

Regardless of the current shortage of mainland art collectors, China is emerging as a major art center, having become a hub for buyers from South Korea, Taiwan, Singapore, Indonesia, and Southeast Asia, and for overseas Chinese from all over the world. Reflecting this diversity is the wide range of foreign dealers on the list of 300 galleries in Beijing, including Continua from Italy, Urs Meile from Switzerland, Arario and PKM from South Korea, Beijing Tokyo Art Projects from Japan, and Tang from Indonesia.

"In Beijing it's getting increasingly difficult to speak about the Chinese market as another entity from the broader Asian art market or the international art market," says Meg Maggio, an American who found China in 1988 and ran one of the first galleries in the country, CourtYard, in Beijing, from 1998 to 2006. Now she has her own gallery, P�kin Fine Arts, where she represents an international stable of artists. "How does one describe the marketplace for a Korean artist showing in China or a Chinese artist surviving in New York?" she asks, noting that her business can come from South Korean collectors visiting Beijing or European companies doing business in China.

One factor in China's development as a center for contemporary art is the proliferation of art fairs. Beijing has two, the China International Gallery Exposition and Art Beijing; Shanghai gets the newly created ShContemporary, now in its second year; and Hong Kong just launched ART HK. CIGE director Wang Yihan says her fair attracted 40,000 visitors this year, as the more high-toned ShContemporary brought in 25,000 and ART HK 08 had 19,000. These numbers might seem small in comparison with the 60,000 who crowd Art Basel, but dealers think that the fairs in Asia are worthwhile since they attract new buyers and make Asian collectors feel more comfortable about acquiring art from galleries.

"Anywhere else, a good is just a fair," says Lorenz Helbling of ShanghART, among the oldest galleries in China and a participant in Art Basel. "But in Shanghai a fair feels like a lot more because only there did it make an impact on several million people." He is referring not merely to attendance but to the intensive publicity and official recognition given to ShContemporary in its inaugural year.

Just a few years ago it would have already been impossible to attempt to sell contemporary art to Asian buyers, aside from mainland Chinese collectors, in the general public forum of an art fair. Now, with the astounding success of Chinese contemporary art, collectors from over the region-and more than a few from the United States and Europe-are targeting China as a destination. According to Nick Simunovic, who has opened an office and showroom for Gagosian Gallery in Hong Kong, it is just a matter of time before these regional buyers turn their focus on Western contemporary art.

"My sense is that wherever you have tremendous wealth creation, the collecting cycle goes through three phases," he says. "First, people collect their cultural patrimony, and then they collect their own contemporary art. I believe the ultimate stage is if they gain a more globalized contemporary-art approach."

Gagosian first considered opening an office in Shanghai but encountered obstacles to doing business on the mainland. Probably the most formidable of these is a 34 percent luxury tax on art, which foreign galleries that participated in ShContemporary found difficult to avoid. Hong Kong, in comparison, is really a duty-free zone. And Simunovic discovered that even Jeff Koons was a tough sell in Shanghai, whereas Hong Kong offers more possibilities for Western contemporary art. Just a year ago Hong Kong billionaire Joseph Lau paid $72 million for Andy Warhol's Green MOTOR VEHICLE ACCIDENT (Green Burning Car I). IN-MAY Christie's brought a Warhol portrait of Mao, valued at $120 million and on the market privately, for viewing in Hong Kong. (At press time it had not yet been sold.)

"Sure, China is hot, but that's just the peak of the iceberg," says Lorenzo Rudolf, former director of Art Basel and cofounder of ShContemporary. "This is not just about several Chinese painters. It's about a growing market going on in this continent."

With the sheer abundance of galleries, auction houses, and art fairs in China, the larger art world is recognizing the energy of the Asian market. Standing within an auction house in NY or London watching paintings by Chinese artists sell for millions, you can grouse about this boom and hint that it will grow to be a bubble. But strolling in a bustling gallery district in Beijing, with students and tourists crowding the caf�s and boutiques and filling the huge art showrooms, few would predict a downturn in the near future.
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