Skip to main content

Deadbeat art buyers rise in China

By Pauline Chiou, CNN
updated 10:17 PM EDT, Wed June 6, 2012
A man looks at artworks on display during a Christie's spring auction preview in Hong Kong on May 24, 2012.
A man looks at artworks on display during a Christie's spring auction preview in Hong Kong on May 24, 2012.
STORY HIGHLIGHTS
  • As art sales in China grow, so are the difficulties receiving payment for auction buys
  • Rise in art sales defaults comes in tandem with Asia's growing impact on the global art market
  • Sotheby's recently introduced a policy where all bidders must pay a minimum deposit
  • "Up until 2008, Asia was 2-4% of group sales. Today, 25% of our buyers come from (Asia)"

Editor's note: Editor's note: Pauline Chiou is a CNN anchor/correspondent based in Hong Kong. Follow Pauline on Twitter @PaulineCNN

Hong Kong (CNN) -- Hong Kong art collector Alan Lo and his father share a love for Chinese art. The younger Lo buys modern Chinese art; his dad owns an important collection of traditional Chinese ink drawings. In the past, they've sold some of their pieces at auction without much drama. However, there was one particularly frustrating transaction.

"My dad encountered an experience where he sold a piece of work upwards of $5 million to $10 million. It took the buyer almost half a year to pay the auction house," Lo recalls, saying the anonymous buyer was most likely from mainland China.

Whether it's a cultural issue or a calculated financial move, non-payment causes major headaches for all players involved. The sellers don't get their money, the auction house doesn't get its commission, and storage and insurance costs add up.

"With big-ticket items, it's becoming more and more of a concern with mainland buyers. To a certain extent, they have less of a tendency to follow the rules of the game," Lo says. "Sometimes, it's not so much about the money. They just can't be bothered. Their attitude is, 'I'm such a big customer. I can't be bothered. Maybe I'll pay a third now and then another third later'."

The rise in deadbeat art buyers in the region comes in tandem with Asia's growing importance in the global art market. "Up until 2008, Asia was 2% to 4% of group sales," says Francois Curiel, president of Christie's Asia. "Today, 25% of our buyers come from this region."

China's race for resources
Woman at the heart of 'China's Google'
Manufacturing relationships with China

"Mainland buyers not paying seems to be a phenomenon that's increasingly prevalent," says fine art consultant Jonathan Crockett, based in Hong Kong. "They always have the money but they don't necessarily want to spend it. Yet, they still want the art. They want the best of both worlds." Crockett's worst experience was overseeing a transaction in which the buyer took two years to pay up.

Sotheby's has been bitten hard in the past and now takes a very aggressive stance against deadbeat auction winners. Sotheby's Asia has filed 13 lawsuits since 2007 with five cases still unresolved.

"Our lawsuits do not mean that we are experiencing more defaults than other auction houses. It just means that we take our obligations to our consignors seriously and are willing to take this step when necessary to protect them," Kevin Ching, CEO of Sotheby's Asia, wrote in an email to CNN.

Sotheby's recently sued two mainland buyers, Ma Dong and Ren Chunxia, because they hadn't paid for winning bids that totaled $15 million. Sotheby's confirms Ren has since settled her payment while the case against Ma is still winding its way through Hong Kong's High Court.

While mainland buyers get most of the bad rap, industry insiders say the problem also exists among buyers from other emerging markets like Indonesia and Malaysia.

Christie's Asia says the problem is not a major issue for the auction house today but it was a problem back in 2010. "I always wondered why someone would come to an auction, raise their hand and bid, and decide not to pay afterward," says Curiel. "I thought it was something new for some customers -- like going to a gallery, deciding to buy and the next day changing their mind. I suppose it was because some collectors were new to the auction game and were not familiar with it."

As a safeguard, major auction houses often require significant deposits before the bidding takes place. Last October, Sotheby's introduced an across-the-board deposit policy in which prospective bidders must put down a minimum deposit of HK $200,000 (US$25,800). At Christie's Asia "we ask you to pay a 20% deposit on what we think you're going to buy ... If you win the bid, that 20% goes toward the sale," says Curiel. "If not, we return the money to you the day after the auction."

Before an auction, both Sotheby's and Christie's ask for bank references from bidders or talk to major dealers to find out if the bidder has a good track record.

Still, buyer and seller beware. "The risk is inherent. Art is generally not the most liquid of assets. It's probably one of the most illiquid in terms of worth. So people trying to put off payment is just part of that," cautions Crockett.

Lo explains why the risk may be worth taking at auction, compared to buying art through a gallery or middleman. "Chances are you are still getting the best price at auction," he says. "The risk is higher and there's more concern about getting payment, but it's the risk the seller has to take."

ADVERTISEMENT
Part of complete coverage on
See CNN's complete coverage on China.
updated 10:30 PM EDT, Thu July 17, 2014
Some savvy individuals in China are claiming naming rights to valuable foreign brands. Here's how companies can combat them.
updated 5:11 AM EDT, Wed July 16, 2014
Is Xi Jinping a true reformist or merely a "dictator" in disguise? CNN's Beijing bureau chief Jaime FlorCruz dissects the leader's policies
updated 11:44 PM EDT, Mon July 7, 2014
With a population of 1.3 billion, you'd think that there would be 11 people in China who are good enough to put up a fight on the football pitch.
updated 2:31 AM EDT, Fri July 4, 2014
26-year-old Ji Cheng is the first rider from China to compete for competitive cycling's highest honor.
updated 7:24 AM EDT, Mon July 7, 2014
China's richest man, Wang Jianlin, may not yet be a household name outside of China, but that could be about to change.
updated 12:14 AM EDT, Fri July 4, 2014
Hong Kong's narrow streets were once a dazzling gallery of neon, where banks and even bordellos plied their trade under sizzling tubular signs.
updated 7:57 PM EDT, Thu July 3, 2014
When President Xi Jinping arrives in Seoul this week, the Chinese leader will have passed over North Korea in favor of its arch rival.
updated 7:59 AM EDT, Thu July 3, 2014
Three more officials have been given the chop as part of China's anti-corruption drive, including former aides to the retired security chief.
updated 9:05 AM EDT, Tue July 1, 2014
As thousands of Hong Kongers prepare for an annual protest, voices in China's press warn pro-democracy activism is a bad idea.
updated 12:37 AM EDT, Mon June 30, 2014
Hong Kongers are demanding the right to directly elect their next leader, setting up a face-off with Beijing.
updated 2:56 AM EDT, Tue July 1, 2014
The push for democratic reform in Hong Kong is testing China's "one country, two systems" model.
updated 7:56 AM EDT, Mon June 30, 2014
Along a winding Chinese mountain road dotted with inns and restaurants is Jinan Orphanage, a place of refuge and site for troubled parents to dump unwanted children.
updated 4:36 AM EDT, Thu June 26, 2014
CNN's Kristie Lu Stout invites Isaac Mao, Han Dongfang, and James Miles to discuss the rise of civil society in China and social media's crucial role.
updated 11:34 PM EDT, Wed June 25, 2014
Chen Guangbiao wants rich people to give more to charity and he'll do anything to get their attention, including buying lunch for poor New Yorkers.
updated 7:44 AM EDT, Thu June 26, 2014
Architects are planning to build the future world's tallest towers in China. They're going to come in pretty colors.
updated 7:47 AM EDT, Mon June 23, 2014
Anna Coren visits Yulin's annual dog meat festival. Dogs are part of the daily diet here, with an estimated 10,000 dogs killed for the festival alone.
updated 2:38 AM EDT, Thu June 19, 2014
People know little about sex, but are having plenty of it. We take a look at the ramifications of a lack of sex education in China.
updated 4:12 AM EDT, Fri June 13, 2014
Hong Kongers have reacted angrily to a Chinese government white paper affirming Beijing's control over the territory.
The emphasis on national glory -- rather than purely personal achievement -- is key.
updated 12:14 PM EDT, Mon June 16, 2014
A replica of the Effel Tower in Tianducheng, a luxury real estate development located in Hangzhou, east China's Zhejiang province.
What's the Eiffel Tower doing in China? Replica towns of the world's most famous monuments spring up all over China.
updated 8:13 PM EDT, Tue June 10, 2014
Rapid development hasn't just boosted the economy -- it has opened up vast swathes of the country, says a man who has spent much of his life exploring it.
updated 2:54 AM EDT, Tue June 10, 2014
The World Cup is apparently making a lot of people "ill" in China.
ADVERTISEMENT