Who is buying?
China Middle Class: Powering Global Art Market
China in recent years has been gaining ground on the West in the number of art collectors. Art collecting in China has been boosted by the country’s flourishing economy and rapidly expanding middle class over the last 10 years. With more disposable income, Chinese people have developed a strong appetite for luxury goods, overseas trips, and art collection. The United States and Europe no longer dominate the international art and antiques market.
The new growing middle class
Driven by a $2.3 trillion increase in consumption by China’s middle-class between now and 2020, China’s consumer spending is projected to outstrip developed markets by 2020 – surpassing expected growth in the US, Japan, Germany, the UK, and France. More astonishingly is the fact that this is slated to happen, even if China’s GDP slows to 5.5%. Upper-middle class households refer to household whose annual disposable income ranges from US$24,000 to US$46,000, and affluent households, with disposable income over US$46,000, would double to 100 million by 2020.
Art collecting in China has been boosted by the country’s flourishing economy and rapidly expanding middle class over the last 10 years. With more disposable income, Chinese people have developed a strong appetite for luxury goods, overseas trips, and art collection.
Buying Overseas or online
A Chinese Antique at an Art auction in London
Although Chinese art collectors are obsessed with the unique artistic appeal and investment potential of ancient or antique Chinese paintings and fine Antiques (include English Silver and Chinese Export Silver), a key weakness lies in the limited supply of top-quality artworks coming on to the auction market in China. As such antique artworks become fewer and more expensive in the domestic market, Chinese people head abroad for treasure hunting.
During World War II, a massive amount of Chinese Antiques were either destroyed or looted abroad. Therefore, some of the finest Chinese artworks are available, or can be found at cheaper prices, only outside Mainland China. Take for example Chinese Export Silver, it is made in China but was export to the west during the 18th and 19th century. Today, both Europe and the U.S. see a growing number of Chinese art buyers visiting their galleries and participating in art auctions. In 2013, 662 auction houses reported sales of Chinese Art and throughout the world, an increase of 12.7% from 2012, among which 57.7% were located in Mainland China, 21.6% in Europe, and 11.9% in North America. In 2014, total global sales of Chinese decorative art and Antiques reached $1.75 billion. China’s global share of this market was 82% by value. (Source: Global Art Sales in 2014 Break All Known Records – Tefaf)
The Chinese mentality
Art and antiques are tangible investments that can be visually enjoyed while they create a monetary profit for those collectors who are willing to hold onto their pieces during the time their value gradually increases.
A lot of Chinese people look at it as an investment rather than a hobby. But in China when compared to Western collectors, there are relatively few collectors who collect just out of passion. Such a mentality could has led to some very irrational speculation. Examples could include the recent Dzi beads.
For us, we believed that Chinese Export Silver is slowly gaining recognition. Reader may also be interested to read our article on Investing in Chinese Export Silver.
How to invest in Chinese Art
Art belongs to the class of investments known as prestige assets. This means that the person who acquires this asset is taking on the responsibility to preserve and protect a piece of human accomplishment. As with other investments, however, it is imperative to know the right strategy to use in order to maximize the returns on your asset. There are two ways to go about profiting from investing in Chinese art:
1. Buy and hold: Chinese art is a long term investment due to its high price and low transaction rates. Investors should therefore be prepared to hold the asset for a while and look to realize considerable returns once its value goes up.
2. Buy low sell high: This is an investment strategy for those looking to take advantage of abnormal price movements in the art market and should benefit those who are willing to hold on to their asset long enough for this to happen.
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