Sotheby's will hold its first major auction on the Chinese mainland on Sunday as competition between the New York-based auction house and its long-time rival Christie's moves into one of the world's hottest art markets amid a government crackdown on corruption and luxury spending.
Sotheby's and its local joint venture partner, Beijing Gehua Art Company, are offering a slate of modern and contemporary Chinese works with a total estimated value of more than 123 million yuan ($20.19 million) as part of "Beijing Art Week".
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The event will feature more than 100 lots including canvases by some of China's most renowned oil and ink painters, as well as three selling exhibitions with a selection of diamonds and European furniture and art.
A $50 million Rembrandt, "Portrait of a Man with Arms Akimbo" will be part of one selling exhibition, while the auction's cover lot, Zao Wou-ki's "Abstraction", is expected to pull in anywhere from 35 million to 45 million yuan ($5.74 million to $7.39 million).
"The Beijing Art Week is basically our first major move into China," said Kevin Ching, CEO of Sotheby's Asia. "But what we're doing is not just an auction."
Sotheby's arrives in Beijing at a tough time for big spenders as China cracks down on corruption and extravagance by government officials that has affected sales of everything from luxury cars to high-end liquors.
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The Chinese auction market has also been dogged by a range of problems, including a large-scale customs probe into tax evasion on art imports last year.
Rampant forgery and market manipulation, including money laundering, are other issues, experts say.
Widespread non-payment is another hurdle. In 2011, a painting by 20th-century master Qi Baishi was sold for $65 million at the Chinese auction house Guardian, but the buyer refused to pay after questions of authenticity were raised.
Foreign auction houses are also at a disadvantage against home-grown competitors such as Poly International, Guardian and Council, which dominate 89 percent of the high-priced auction market, because only Chinese firms are allowed to sell Chinese cultural relics, such as Chinese antiques and traditional Chinese paintings, said Sotheby's Ching.
"We really can't touch what should be the most lucrative sectors," he said.
Sotheby's has all the reason to enter the Chinese market, which was estimated last year to be worth 8.9 billion euros ($12.10 billion) compared to 6.8 billion euros ($9.25 billion) for the United States and 3.5 billion euros ($4.76 billion) for the United Kingdom, according to France's Conseil des Ventes.
The Chinese market actually peaked in 2011, with revenue from auction sales falling as much as 48 percent from 2011 highs of 55.35 billion yuan ($9.09 billion) to 28.85 billion yuan ($4.74 billion) last year, according the China Association of Auctioneers.
The market dropped because of a slowdown in economic growth in China, a reduced amount of high-quality, high-priced works coming onto the market and many art funds and other speculative investors also reduced their participation in the market during the year, according to market participants.
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However, demand for everything from antiques to artwork is expected to continue, said Philip Tinari, director of the Ullens Center for Contemporary Art in Beijing.
"I think a lot of people are eager to see what it'll mean to have a regular Sotheby's presence on the Beijing auction calendar," said Tinari.
Growing Chinese interest in art is a "symptom of an ever increasing cosmopolitanism," added Tinari. At the same time, mainland buyers see art as "a convenient and compelling alternative investment."
Chinese real estate mogul Wang Jianlin, chairman of Dalian Wanda Group, recently made a splash when he bought a Picasso at Christie's in New York for $28.2 million.
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Last year, Sotheby's hosted a small, inaugural auction in Beijing when it became the first foreign auction house to obtain a license. Christie's hosted its first auction in Shanghai this September, selling $25 million worth of art, jewelry, watches and wine.
"There have been peaks and troughs, but the overall arc has been consistently upward," said Tinari, noting that 10 years ago, there wasn't much of an art market in China at all.