Industry

The Art Market in China

The art and antiques market in China first emerged as an important marketplace in the early years of this century, when it began a path of rapid growth fueled by a highly active auction sector and the rising demand of an expanding segment of wealthy collectors and investors. The period from 2008 through 2011 saw explosive growth in China's auction sector - with aggregate sales increasing by about 500% - and led to China overtaking the United States as the leading art and antiques market worldwide. Rapid expansion cooled after 2011 but for the next three years regained its momentum, once again placing China into its leading global position. In 2015, however, mainly due to the contraction of the Chinese economy, China's art sales dropped 23% to $11.8 billion, or nearly19% of the $63.8 billion global fine art market, placing it third behind the U.S. and U.K. (source: The Wall Street Journal). In 2016, China retained this ranking, with 18% of the world's fine art market (source: TEFAF Art Market Report 2017).

Although online fine art sales for China alone are not readily available, by year-end 2016, China had over 2,000 online e-commerce sites devoted to sales of art. Globally, there is little doubt that this sector had its best year yet in 2016, totaling $4.9 billion, or almost 9 percent of the worldwide market. As part of this growth, last year saw leading auction houses such as Christie's and Sotheby's continue to live-stream their auctions online. Other online auction houses, including Auctionata, Hihey, and Paddle8, strengthened their status as trusted fine art commerce venues, and other sites such as Liveauctioneers, Invaluable, ATG Media's The Salesroom and many others gained significant visibility among art investors and collectors. Each of these sites was able to position itself favorably against traditional galleries, auction houses and art fairs by providing a far greater number of artworks to choose from, expanded information on these works, improved levels of information on prices, artwork provenance and authenticity, and the use of digital technologies like virtual and augmented reality in order to view artworks online.

And art industry experts expect these trends to continue: According to The Wall Street Journal, 73% of art professionals and 69% of collectors believe online art sites will play an important role in the art market for at least three years. A quarter of them even say online sites could actually replace traditional art market operators.

Today, there are well over 400 licensed auction houses in China, up more than 60% in number since 2009. In 2016, even with a 2.6 percent drop compared to 2015, China still had the world's highest reported auction sales - $6.33 billion (Source: Artnet). Average auction sales prices of modern art increased 6 percent in 2016, among the best performance of all art categories.

The Challenge

The reduction in fine art sales in China in 2015 suggests that this market, after several years of rapid growth, may have finally reached a saturation point. And despite the fact that the average disposable annual income of an urban China household at the end of 2015 had increased more than fifteen fold since 1990, the vast majority of these households still lack the disposable income necessary to invest easily in the art market, where a single piece often costs upwards of US $50,000 -- and many pieces cost many times that amount.

The Solution

With the above realities in mind, it seems reasonable to assume that the shared fine art ownership model in China, as practiced by Takung, will continue to prosper. First and foremost, this novel approach greatly lowers the financial requirement necessary to invest in fine art, thus making it possible for an increasing number of typical urban households to participate in this exciting market. Second, the shared ownership model offers these households the security of knowing the piece in which they are investing is authentic and carries a value appraised by some of the leading experts in the nation. Third, this new model provides investors a very high level of liquidity, meaning they can sell their ownership units at any time at or near the market price. Last but not least, the broad growth and projected expansion of online art sales can only provide an added boost to the attractiveness of Takung's online shared ownership model. These advantages, in combination, are likely to exponentially increase the number of investors in the Chinese online fine art market, and help Takung to attract increasing numbers of investors in the months and years to come.

For many of the same reasons, it seems likely that the offering of moderately-priced whole pieces of art, as marketed via Takung Online, will find a strong foothold among China's increasingly affluent middle class.