China's once-booming art market is experiencing a severe crisis, with half of all auction lots selling for more than $1.4 million going unpaid by May 2024. This represents the highest proportion of non-payment in any year outside the COVID-19 pandemic since at least 2012, according to the China Association of Auctioneers. The dramatic shift reflects broader economic challenges facing the country and marks a stark contrast to the free-spending era that dominated global art markets for two decades.
Jiao Qinghua, a 6-foot-2-inch former bodybuilding champion and veteran of the coal industry from China's eastern Jiangsu province, embodies the current market sentiment. As he browsed lots at Shanghai auction house Council's sale, he expressed deep pessimism about the market's direction. "The economy is declining and the pressure is high," Jiao explained during an interview at his hotel near Shanghai People's Park. "A lot of bosses and entrepreneurs used to dare to buy. Now they don't dare to buy because they have no confidence."
The collector, who purchases art with a business partner, believes the mainland Chinese art market has entered a downward spiral with no clear recovery timeline. "Before 2015, all segments of the market – no matter if it was painting, porcelain, antiquities, Chinese furniture – they all sold well," he recalled. "After 2015, it started to be quite bad, a lot of people's purchasing power was restricted." While the market held up broadly until around 2018, the pandemic delivered what he considers a death blow to buyer confidence.
The current crisis marks a dramatic reversal from the market's golden age in the mid-2010s, when newly wealthy Chinese individuals stunned the auction world with extravagant purchases. Wang Jianlin, chairman of property conglomerate Dalian Wanda Group and then China's richest man, paid $28.2 million for Pablo Picasso's "Claude et Paloma" at a Christie's auction in New York in 2013. Two years later, Liu Yiqian, a former cab driver turned billionaire stock trader, spent $170.4 million on Amedeo Modigliani's "Nu Couché," paying for it with multiple swipes of his American Express card. He had previously used his Amex to purchase a $36 million Ming dynasty porcelain tea cup – and then drank from it.
Patti Wong, former Asia and international chair at Sotheby's, witnessed this transformation firsthand during her nearly 20-year tenure. In the 1990s, Asian buyers represented just a fraction of the auction house's sales – "maybe 5 percent of the total turnover," she estimates. "And by the time coming up to COVID, for Sotheby's, like a third of the business was happening in Hong Kong." By 2011, Chinese buyers were so active that 10 of the 15 most sought-after artists globally were of Chinese origin, with painters Zhang Daqian and Qi Baishi both surpassing Picasso's record for the largest annual sales value.
Wong describes how Chinese buyers approached the market with unprecedented eagerness and competitiveness. "They came in right at the top. This is a generation of buyers who had made money over a very short time and were eager," she explained from her Hong Kong art advisory office. "So first was the national pride of buying your own national objects back. But later it was actually trophy-buying and wanting to make a mark on the international scene." This hunger made them formidable competitors who could name major collectors like Microsoft co-founder Paul Allen and sought to compete at their level.
The recent Shanghai Council auction illustrated both the market's continued activity and its underlying weakness. Several items sold well above their upper estimates, including "Double Happiness Arrives at the Door" (1947), an ink painting of magpies by Xu Beihong, and "Subdistrict Office Canteen" (1960), a collectively-painted socialist ink work. "Autumn Heights of Qixia" (1992) by Wei Zixi sold for 1.92 million yuan, more than twice its upper estimate. The three-hour Chinese painting and calligraphy auction was described by Shanghai Council as filled with "passion and energy."
However, closer examination revealed the market's struggles. While many works exceeded expectations, the majority sold for well under values they might have fetched in previous years, according to collectors and market insiders. The catalogue itself told this story: next to Xu Beihong's magpies, which sold for 2.4 million yuan, was an image of his visually similar "Four Happinesses," which sold for 28.75 million yuan in 2011. A rooster by the same artist sold for 850,000 yuan, featured alongside another that previously sold for over 10 million yuan.
The world's largest auction houses had remained optimistic about Chinese demand even during the pandemic, with Sotheby's, Christie's, Phillips, and Bonhams all developing plans for bigger, more luxurious Hong Kong headquarters. The semi-autonomous territory's proximity to mainland China, freely convertible currency pegged to the US dollar, absence of capital controls, and few restrictions on cultural heritage imports made it an ideal hub for Chinese and international buyers alike.
However, when these new facilities opened, relying on Chinese buyers appeared to be poorly timed. Asian buyers' contribution to global auction sales at Christie's had fallen to 21 percent by the time it opened its new Hong Kong headquarters, down from 39 percent when it first announced the plan in 2021. Sotheby's meanwhile suffered layoffs and cutbacks. In 2024, auction sales in mainland China plummeted 38 percent year-over-year, causing the country to fall to third place in global art market rankings, according to the Art Basel/UBS Art Market Report.
Clare McAndrew, founder of Arts Economics, which produces the Art Basel/UBS Art Market Report, noted that while there was initial "revenge spending" from Chinese buyers in early 2023 as COVID controls were lifted, this had already begun to fade by the second half of the year. "All the issues that we've had are still around," she explained. "Art is not immune." The slowdown reflected broader economic challenges, including years of strict lockdowns that hammered China's growth and ruined consumer confidence, plus a prolonged crisis in the massive property sector that had been a key driver of rising wealth.
Some collectors remain more optimistic about current conditions. Xie Wenwei, who owns Guangzhou-based antiques dealer Man Po Chai, believes now is the time to buy. Chinese antiquities have been particularly hard hit because pieces within China generally cannot be purchased for export, making the domestic market closely tied to the Chinese economy's fluctuations. "The economy these past few years has been a bit on the decline," he acknowledged while sipping tea surrounded by Ming and Qing dynasty ceramics in his Guangzhou office. "There are fewer buyers with less spending power."
Xie also highlighted how tighter enforcement of capital controls has affected Hong Kong auction sales. "If your money is onshore it will be very difficult," he explained. "Small payments of several million renminbi will generally be OK; anything in the tens to hundreds of millions would be very difficult." Beijing enforces strict capital controls limiting citizens to taking $50,000 out of the country annually, and getting money out for offshore auctions has become increasingly difficult since around 2018. Previous workarounds, such as using bank cards so regulators viewed transactions as discretionary spending rather than currency transfers, have been restricted.
The issue of non-payment particularly frustrates collectors like Jiao, who experienced the problem firsthand when a work he sold at a Beijing auction in April was never paid for. He now faces selling the piece again elsewhere, likely for a much lower price. "There are lots of non-transacted works now," he said. "All people in the auction industry have experienced this." Industry experts remain perplexed about why unpaid work levels stay so high and why Chinese auction houses continue dealing with clients who fail to make payments.
Various explanations have emerged for the non-payment crisis. Some suggest that registering bogus sales can help create hype for artists, while others point to China's legal environment making it difficult and time-consuming to sue non-paying buyers. Smaller auction houses are reluctant to disclose failed sales for fear of harming overall market sentiment. In some cases, auction houses offer flexible payment terms to entice buyers, but economic hardship can lead to cold feet, bankruptcy, or buyer's remorse after additional research.
While non-payment issues aren't restricted to mainland China, Western auction houses maintain much stricter requirements for new bidders and significantly lower rates of incomplete transactions. Potential buyers without established records must typically pay substantial deposits to bid on expensive lots or provide proof of adequate funds. A former senior Hong Kong auction executive emphasized their vigilance: "We are very strict on this: the last thing we want is that something is sold but it's not being paid."
For Jiao, the explanation is straightforward: "A lot of people don't pay when the economy isn't good. They don't want to take their money out of their pockets." While he sees the current climate as an opportunity for bargains, his long-term outlook remains gloomy. Despite agreeing with other collectors that prices have fallen enough to warrant purchases, he remains uncertain about the market's future direction. "We don't know where the bottom is," he concluded, reflecting the broader uncertainty gripping China's art market as it grapples with economic headwinds and shifting collector behavior.
