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Art market chills in spring (3)

By Zhang Yuchen (China Daily)

10:13, March 29, 2013

In years gone by, Chinese collectors paid top dollar for the best items and hung onto their purchases, rather than simply looking to immediately sell them on to auction houses in the hope of increased profit, especially at times when the market appeared highly unpredictable, said Liu Shangyong. "There are simply fewer things worth putting money into than before," he admitted.

But when considering the reasons that make collectors unwilling to sell the pieces they've accrued, people should be aware of the natural laws of the market and the way they balance out over the long term, said Dong Jun of the Forever International Auction Company Ltd, the only auction house on the Chinese mainland authorized to use the registered trademark of Christie's, the world's leading art auction house.

"That is why we have to let the market develop step by step, instead of encouraging an abnormally fast rate of growth," he said.

'The right to follow'

A more recent, and potentially worrisome, development is that of a new policy, known as Droit de suite, or "the right to follow". The policy was proposed by China's National Copyright Administration in March 2011 and is set to go before the State Council at some point, although no time scale has been revealed.

The implementation of Droit de suite in China would allow artists, and their descendants in some cases, to profit from the resale of their works. In most countries where the rule is used, artists benefit to the tune of around 1 to 5 percent.

The proposal has caused a wave of unease among auctioneers who say the imposition of the resale levy will stifle the market. However, the authorities point to the fact that it would prevent the resale of a large number of fakes and push the nation's art market higher up the value chain

In Europe, the system is used to fix the amount paid to the artists as a percentage of the profit accrued by the reseller and not the whole value of the sale, irrespective of whether or not the deal is made through an auctioneer, according to Liu Shuangzhou, a professor at the law school at the Central University of Finance and Economics.

However, the proposal presented to the Chinese authorities calls for the charge to be payable only by auctioneers and not individuals who sell directly from their own collections. It's that aspect of the move that's prompted the dissatisfaction among the auctioneers.

"It is difficult to decide if it's a good way to protect artists and their rights, not to mention the effect it could have on the market and investors," said Liu Shuangzhou. "Experienced collectors will probably only part with really treasured pieces when they become 'must-sell' items."

"An extra payment, especially when its seems like a punishment, will make investors and artists leave the market," said Gan Xuejun, president and chairman of Beijing Huachen Auctions Co.

The lack of general investment options in China is adding fuel to the fire and leaving those with expendable capital with fewer opportunities to put their money in the pool, said Guan Yu. Usually, investors buy and sell paintings and other art works as a means of managing and increasing their wealth, rather than collecting works purely for their aesthetic value.

In coming years, auctioneers should put more effort into raising investors' awareness of artistic value instead of just concentrating on financial gain, said experts.

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