How the Art Market Response to Financial Crisis

Date: 2008-12-26  Source: Guangming Daily  News  By: Yan Hongfeng Wang Simin Zhou Buhui

Due to the spread of the financial crisis starting from America, the global art market was also affected. From September to October of 2009, the turnover of works of art shrank 20.5%. It triggered collectors’ concerns: where would the art market in China go in the financial crisis?

“The market is still in the right track. Financial crisis is not only a shock, but also a catalyst of the market itself.” said manager of XiLing Auction Company Lu Jingqing.

“It has been proved that the price of classical collections is still rising.” said Mr. Lu. He believes that works of art are exceptionally strong because their values depend on artistic value, historical value, and other elements. The non-renewability and scarcity guaranteed the stability of the price. Generally speaking, the larger percentage historical and cultural elements take up in the price composition, the less impact will the price get. In recent years, the price of the artwork was hardly affected by global capital. Price rising is a reflection of the value, not the result of global hot money investment.

“Catastrophes usually awake the spiritual pursuit of individuals and facilitate the prosperity and spread of culture.” added Mr. Lu. In the past decade, Chinese art market went through Asian financial crisis, SARS crisis, and some other disasters. Every disaster brought in new atmosphere. For example, after the SARS crisis in 2003, people concerned more about spiritual pursuit, which took Chinese art market to a new height in 2004.

In Mr. Lu’s opinion, for the seller’s market, financial pressure caused by the crisis would urge some collectors to sell part of their collections at a low price. As a result, other collectors can take this chance to expand collections.

What is more noticeable is that the financial crisis may lead to the return of more Chinese relics in other countries, which will help with the deepening and expansion of transactions in the art market. On January 2nd, 2009, XiLing Auction will also hold its autumn auctions, where a large number of oversea Chinese relics will be auctioned.

“Despite the affection from the financial crisis, the steady political situation and independent financial system kept the art market from the influences of the disaster.” Lu said.

After 15 years’ growth, it is agreed that the Chinese art auction market is now at a very crucial point. Coincidentally, this global financial crisis brought the opportunity for its self-regulation.

Mr. Lu analyzed, “During the past 30 years, changes happened to Chinese collectors helped with the improvement of this group. However, during 2003 and 2007, the increasing of auctions companies attracted a large number of investors and speculators. On one hand, they became a flexible force and led to the prosperity of the art market. On the other hand, however, they caused overheating of the market. “The financial crisis might help with the rectification of the art market. Speculators will retreat from it and real collectors will enter. Meanwhile, arts with Chinese features and culture will grow.

“When owners of the artwork are mainly collectors, not investors and speculators, the art market will show its spiritual values.” said Mr. Lu confidently, “Then it will be natural for the Chinese art market with a sound foundation to integrate with the international art market.”