The Chinese Antiques Is Market Weakening , Will The Bubble Burst?
The Weakening Chinese Antiques Market has been evident now for a couple years. Its a big market so it takes a while to be obvious. Sure it sounds shocking but it's happening. (there is no doubt)
Years ago a wise old investor said;
"when I start getting stock market advice from a cabbies urging me unsolicited to buy a stock I already own, I then know it's time to sell". Cab drivers in China have now been giving similar advice for several years on Chinese antiques.
Remembering the Art Boom in Japan, that went BUST
Did anyone think the meteoric rise of demand and prices would just keep its trajectory of the last 20 years forever? Three words come to mind, "Japan's Art market". Less than 30 years ago Japan was in the news constantly for the terrific prices Japanese antiques were bringing. Japan was also in the news for their forays into the western markets. Back then they were gobbling up Impressionist, Modernist, and classical art. Paying tens of millions at auction in New York and London for Vincent van Gogh and other greats. It seemed almost like a daily headlines, do you remember? Japan began driving the art bubble during the 80's with a strong Yen and continued unabated into the late 90's. Then "poof" it was over. The Japanese fled from the market, never to return.
Prices, as we all know of Japanese antiques dropped like bricks with no recovery after 20 decades. Western art, on the other hand, took a minor brief hit for a few years before recovering. The impact of the weakening Chinese antiques market is still unknown. There are many possibilities due to the complicated relationship China has with the west and their own internal drivers.
All bubbles burst, or deflate slowly
The next question is. How fast and deep will the market slide?
Have price rises of the last 20 to 25 years been just a massive bubble with Chinese antiques and art? There's no clear or easy answer to that just yet. For me I think it's been a hybrid of demand, new wealth, and bubble driven by greed alone. Figuring out where one leaves off and the other begins is impossible to determine. However, a case can be made of where greed, demand, and new wealth found it's apex was a few years ago. It happened when Sotheby's sold the famous "Chicken cup" for $35,000,000. Yeah, I know it's rare, it's wonderful etc..but 35 Million Dollars?
20 years ago American Mahogany Newport desks were selling in the 3.5 to 8 Million dollar range with one selling for 12 million. What are they worth today? Probably 20% 30% of those amounts. When we will see another 35 Million dollar Cup? I would suggest you don't hold your breath.
The Weakening Chinese Antiques Market, the first not so subtle hint
"Bonhams Layoffs, Asian Deputy Chairman Renfew" GONE
Yesterday Bonhams Auctioneers announced it was laying off eight employees (25% of the staff) at their Hong Kong offices. The firings included the recently hired Magnus Renfew. This is a direct and obvious result of the Asian art market slowdown. According to FORBES magazine, Renfew, 40, joined the firm in September of 2014. His mission was to head the planned Bonhams expansion in Asia. Renfew and his staff were informed of the decision by Bonhams CEO Matthew Girling personally who flew there to make the announcement.
According to Artprice.com, the auction market in Hong Kong and Taiwan slipped a dramatic 26% year over year as of the end of 2015.
China Is Different Than Japan, Good, and Bad Relatively Speaking
The good news is, China is going through what many think is a long overdue economic contraction from it's annual GDP growth rate of 9% a year. What's causing the contraction is complicated from currency manipulation within China, slowing global demand for Chinese products caused by lagging economies globally. It's tough to expand an export economy at 9% into the world only growing at 1 to 2.6% a year. While much of China's GDP is consumed there, a lot of the money spent there comes from profits garnered abroad. Year over year, as of this January, Chinese exports declined by 11% and imports dropped 22%. The net result is a 32% spread in China's domestic demand for goods, raw materials and sale of produced goods.
So what's the good news in all that?
China still has a massive and relatively inexpensive labor force. Many are still living in poverty, until those rates come down they will still have a competitive labor market. This will happen once China develops a second act in reinvigorating their economy. In other words, the future upside for China is still huge, they just have to find their way. IF this happens, money will resume flowing into the art and antiques market there. I do think the future price increases will be driven by much more restrained enthusiasm. In the near term demand for all but the rarest items will be significantly reduced for the next few years. The Mainland market will have a very difficult time digesting objects in the vast middle market as they become available. The result could create a glut as prices decline and objects try to find new owners ahead of the slide.
How Long Will the Slump Last
A turnaround in China could take a decade or two. They may have to accept a much slower rate of growth than was experienced over the last few decades.
Which brings up the two elephants in the room regarding Chinese art in the meantime. Who and how strong will the buyers be in the global markets compared to the last few decades? Who will be buying inside mainland China? Will the weakening Chinese antiques market cause price distortions?
Will there be a bicameral market, the mainland market, and the global market? Will we see still active buyers on China shopping only there in a captive no-export environment with much lower prices?
When economies sag, antiques and art prices always drop in value first. These decline cause a flood back into the market seeking buyers before losses mount. Remember, most Chinese antiques cannot be exported from China. As things become available in China the price influencers regardless of what they are globally will have no bearing there. Will prices outside of China soften significantly due to a drop in demand from mainland buyers? Will it all find it's way to kind of equilibrium? Will large-scale smuggling of antiques out of China destined for broader global market begin? Prepared collectors will buy some great items, as reasonabel prices.
Obviously, what's happening now raises a lot of questions about the future of the Chinese antiques and art market. How it will all shake out depends on many things and their effects on one another.
It's All Fine With Me
As a dealer and collector of over 30 years, none of this bothers me particularly. Any dealer who's been around for a while will tell you, categories of art go up and they can just as easily go down. It's just part of the business of the antiques and art world. If prices slide and you're a serious collector this is all good news for obvious reasons. If you're more of an investor and been holding something I would suggest you sell now or wait for a long time. The weakening Chinese antiques market will shake out the weak hands and be a boon for collectors.
For me, it's a win-win!