In China's Red-Hot Art Market, Fraud Abounds
As the global economy teeters, one market is still reaching stratospheric highs: Chinese art.
A Hong Kong auction of fine Chinese paintings earlier this month raised $94.8 million, three times pre-sale estimates. In fact, China is now the world's biggest art market, according to the art information agency Artprice.
Yet all is not what it seems in the murky world of Chinese art auctions, including a painting that sold last year for more than $11 million, but appears not to be what was advertised.
The young girl in the painting stands naked against a burgundy backdrop, one leg bent, an elbow crooked behind her back. Her eyes downcast, she looks shy and uncomfortable.
This artwork was put up to auction by Beijing Jiuge Auctions, as a portrait by the famous artist Xu Beihong of his wife, Jiang Biwei, and it sold for $11.4 million. A note from his son, Xu Boyang, on the back of the painting attests that it was by his father, although the artist died in 1953.
But Wang Yanqing, a 66-year-old painter in Inner Mongolia, tells another story.
"It's totally laughable," he says. "That picture doesn't look anything like Xu Beihong's wife." He says the picture was one of several painted by art students in his class at the prestigious Central Academy of Fine Arts (CAFA) in 1983, 30 years after the artist's death. The model was a peasant farmer. Wang was one of those students who painted her, and his memory is crystal clear.
"At that time, it was very difficult to find nude models, so we painted the same ones over and over, and it was boring," he remembers. "Suddenly this new model came — a young girl from the south who'd never modeled before, and everyone was very excited. We all wanted to draw her, so almost 20 of us crowded into the same room. It was one of my most successful pictures. I still have it in my studio."
Indeed, the subject in his painting is identical to the one that sold for $11 million, except for the angle. Four other classmates have produced pictures of the same girl, in the same pose, with the same backdrop. As Wang points out, it's an impossible coincidence.
"The person we painted had a 1980s hairstyle," he says, and he also notes the different styles of painting. "Xu Beihong studied in France, so he painted in a Western European style. But we were painting under the Soviet influence in a Russian style." He and his classmates published an open letter exposing the picture as a fake to stop it from circulating on the market.
No Standards For Auctions
"At this moment, in practice, there are no standards" in the Chinese art market, says Gong Jisui, a former Sotheby's expert who's now a visiting scholar in Beijing at CAFA.
"It's really, really bad. For the classical Chinese paintings, most of the pieces are disputable," Gong says. "Also, for modern Chinese paintings, there is a serious problem with authenticity issues."
It's not just the pieces that might be fake. At Chinese auctions, the bids are sometimes fake too. In some cases, the seller, or even the artist, may bid on their own pieces to push the prices up. The practice is not illegal in China.
Sometimes auctions are used to pass bribes. For example, the buyer overbids for something mediocre — or even fake — and so passes money legally to the seller. Many auction houses turn a blind eye, since the higher the price, the higher their commission.
Paul Dong of Forever Auctions, the trademark licensee for Christie's in China, describes how the approach is made. "There are clients at certain times who come to us and say, 'Don't look at the quality of the property. I can assure you someone will buy it at a very high price, you'll earn your money.' We absolutely reject such offers."
Buyers Who Fail To Pay
And then there's the problem of non-payment. Last November, a Qing Dynasty vase broke all records when it sold in a suburban London auction house, Bainbridges, for 43 million pounds — or $70 million.
For months, the Chinese buyer refused to pay up, necessitating a trip to China by auctioneer Peter Bainbridge, accompanied by the vase's seller, Tony Johnson. In May, one British newspaper reported that a deposit of 2 million pounds had been paid for the vase, and more would be paid. Both Bainbridge and Johnson refuse to comment on the current situation, but it's understood that some money has now changed hands.
In 2009, an even more prominent case involved the refusal of a Chinese buyer to pay the almost $18 million he'd bid for two bronze animal heads previously looted from the Yuanmingyuan, or old Summer Palace.
Such late payment or even non-payment is a sign that dodgy auction practices are being exported, as Chinese funds swell overseas art markets. In China, non-payment for winning bids is very common indeed, precipitating moves by Chinese auction houses to require potential bidders to put down deposits.
Ou Shuying of the Chinese Association for Auctioneers says the group has just compiled statistics on non-payment for the first time, "Of those star lots that sold for more than 10 million yuan [$1.5 mllion] in last year's autumn sales, 40 percent of those bills had not been settled by the end of this April."
Insiders say even that is a very conservative estimate. And the higher the price, the more likely it is not to be paid. One major factor is the infancy of the market, meaning the whole concept of auctions is alien in China.
"Many buyers don't understand the conventions," says Zhang Yanhua, president of the Chinese Association for Auctioneers. "They think it's like ... farmers markets or supermarkets, and that you can just return the goods whenever you like."
She says the problems inside the auction industry reflect wider problems in Chinese society. "It's a morality problem, and the law cannot legislate on morality," she says.
Calls For Regulation
But she does believe the auction law needs changing. "At the moment, you're only limiting the behavior of the auction house, not the consigner or the buyer. So the consigner can consign fake goods or the buyer can refuse to pay, leading to problems at all stages of the process."
Indeed, whether or not any money actually changes hands, those record prices still stand, inflating the whole market. The effects can trickle out into the broader economy. In one case that was recently exposed, businessman Xie Genrong commissioned a fake ancient jade burial suit made out of pieces of jade stitched together with gold thread. He got five top expert appraisers to vouch for the authenticity of the suit and value it at $375 million. Using that as collateral, a bank gave Xie a $100 million loan for a real estate project.
This saga casts doubt on the role of the appraisers, who work for such august institutions as Beijing's Palace Museum. Of the five, one has since died, and the other four have blamed him, saying they had to carry out the appraisal of the suit without touching it, while it was in a glass case.
But Zhang Ning, a porcelain appraiser who does not specialize in archaeological objects, says such a valuation should never have been given for a jade burial suit: "For a start, it was violating the law. If it had been unearthed in a dig, there's a law that says archaeological objects can't be traded or sold. So the experts should have never given it that estimate. It's likely the experts knew it was fake."
The businessman, Xie Genrong, is now serving a jail term.
Many are now arguing for reform of China's auction law. One major issue is that Chinese auction houses are not responsible for the authenticity of the goods they sell, as long as they issue a disclaimer. But the problem is that the fakery is endemic. In all too many cases, the art is fake, the bids are rigged, the experts are crooked, and the bills are never settled. It's difficult to know what is real, aside from the corruption.