Sotheby’s has established itself as a renowned leader in the world auction market with 90 offices in 40 countries, including Hong Kong. Now the auction house has set its sight on mainland China.
According to Artprice, China has become the world’s second largest fine art market, with Chinese buyers accounting for sales worth $4.8 million in 2011.
“China and its growing class of collectors has been the single most attractive growth market for the company,” said the chief executive of Sotheby’s Asia, Kevin Ching. “We are not coming to make instant profits. That’s not our premier goal. Instead, we will strategically enhance our company’s long-term presence in China and grasp the opportunities presented by the Chinese art market once auction policies for foreign companies turn more favorable,” Ching added.
The company plans to form the first international auction house in China by establishing a joint venture with state-owned Beijing Gehua Cultural Development Group (BGCDG). China does not allow foreign auction houses to trade in the mainland unless they have a domestic partner. The venture also comes at a time when Beijing is trying to clean up the Chinese auction industry of counterfeits, smuggling, and non-payments.
Under the joint venture agreement, Sotheby’s will invest $1.2 million for 80% ownership, and BGCDG will invest $300,000 for the remaining 20%. The new company will be named Sotheby’s (Beijing) Auction Co., Ltd. and will be located within the freeport jointly established by BGCDG and the Tianzhu Free Trade Zone in Beijing’s Shunyi district.
The strategic location benefits from the duty-free advantage of the freeport. “China charges duties of up to 26% for imported artwork,” explains Wang Yudong, a general manager of BGCDG’s subsidiary, Beijing Gehua Art Company. “However, the duty will be exempt and won’t be charged within the freeport if such artwork is eventually taken abroad instead of entering the Chinese market. In the meantime, the freeport will provide a tariff-free storage service.”
The new company will initially focus on modern and contemporary art, jewels, and luxury watches. It will not be allowed to auction cultural relics in the Mainland, but such restrictions may eventually be lifted.
photo credit: sotheby’s