In his monthly columns for ATG, Fine Art Asia fair director and dealer Andy Hei takes a look at the international market from a Far Eastern perspective, sheds light on how to do business with the Chinese in Hong Kong and explains why Hong Kong is a better first stop than mainland China.
The Asian Market
However, during the last five years Hong Kong has entered a whole new era in the buying and selling of Asian art and antiques - new galleries, new fairs, new collectors, along with the increased activity of the auction sales, all contributing to anchoring Hong Kong at the centre for the art world in Asia.
Running a fine art and antiques business in Hong Kong has clear advantages over those of setting up in China. As a free port, it is easy to import and export artworks without restriction and there is no sales tax on art in Hong Kong, whose geographically central location makes it easily accessible to the many well-established and well-heeled collectors and dealers from Japan, Taiwan and South-East Asia.
The most significant development has been the rise of the new, affluent collector from Asia, which has generated much international coverage and is the talk of the town here as well.
The growing number of cashed-up Chinese buyers has many a dealer putting their faith in these newcomers, who are actively visiting fairs and auctions looking for not only Chinese works of art, but both Asian and Western pieces as well.
During my recent visit to the fairs in Maastricht and New York, it was good to see many familiar faces. At Maastricht, not only the well-known and established American collectors were present but also some of my own mainland Chinese colleagues.
This is a positive trend as in the past many Chinese collectors have only been interested in Chinese furniture, but they are broadening their horizons and looking more closely at Western fine art and antiques.
The Asian sales in New York went well, with solid buying and some good figures achieved from Asian dealers and few items going unsold. As a dealer, I was pleased to acquire two pieces, which makes a change after quite a few years of returning with empty suitcases from New York, so hopefully it is a good start to my trading year back in Hollywood Road.
Hong Kong Business
First-time visitors to Hong Kong are always surprised at the contrasts that the city presents. On one hand, it is buzzing, cosmopolitan and sophisticated. Yet the traditional Cantonese culture, customs and business habits are very evident and can, on occasion, appear a little daunting. In business there are some basic golden rules, and I always include the following tips in my 'helpful hints' for newcomers.
Be prepared to build relationships. The business climate in Hong Kong, unlike that in mainland China, is wide open, with limited government involvement and a free market. Hong Kong business activities are competitive and honest. Making money is the main goal, one that is openly understood. Personal contact - such as face-to face selling with a courteous and polite approach - is essential and although negotiations may at times seem slow, it is generally part of the process of building the mutual respect and friendship that underpins business in Hong Kong.
Always have a plentiful supply of business cards, with traditional Chinese characters on one side and English on the other. Offering your card is important; not to do so may suggest you are not interested in making acquaintances or that your own status is unimportant! A handshake is followed immediately by the exchange of business cards, offered and received with both hands, with the writing the right way up to read. Do make a show of examining it - it is impolite to place it straight into your pocket.
Maintaining, giving and losing 'face' is an Asian concept that can be hard to immediately understand. However, it really all rests on courtesy, politeness and respect. An international visitor will automatically be respected and shown deference. In turn, reciprocate with a similar level of deference and formality. Experienced western dealers working with serious Asian collectors know that personally accompanying the delivery of a sold piece is 'giving face' and confirmation that the relationship is as important as the business transaction.
Enjoy your food! Dining out is a very important part of Cantonese culture and any Chinese meal is a mixture of fun, friendship and a customary way of getting to know one another. Don't worry too much about the style of eating or the sometimes adventurous and unknown menu items - appreciation is the key. Hong Kong people are justifiably proud of their culinary traditions and an invitation to a meal is a good signal for business.
Trading In China
In Hong Kong, we have a saying that translates from the Chinese as "with time and patience the mulberry leaf becomes a silk gown", which aptly sums up the rewards, but a "look before you leap" approach should be taken when starting to sell fine art and antiques in China.
Unlike the business-friendly climate of which Hong Kong is justifiably proud, working your way through the myriad of mainland China's regulatory, taxation and custom issues requires expert advice, experience and time, and in some cases can still end in tears!
The biggest hurdle faced by an international company wanting to do business in China, whether by participating in a fair or setting up an office or gallery, is to comply effectively with the complicated and often opaque tax and customs regulations that govern the import/export of artworks in China.
Imported artworks are in the same category as luxury goods in China and can attract tariffs ranging anywhere from 17% to, in some cases, 33% if sold at art fairs in the Chinese mainland. The routine and risky tax evasion practice of declaring lower valuations when importing artworks into China as a method to avoid overpaying of duty to Customs has been widespread among Chinese collectors and was recently publicly highlighted by the arrest of two staff from a China-based art shipping firm.
While the taxes in China on artworks are the highest in the world, which many dealers, including myself, consider could hinder development of the Chinese art and antiques marketplace in the Chinese mainland, interest from mainland collectors is still growing.
Hong Kong, on the other hand, has no import or sales tax on imported or exported works of art or antiques, and art fairs are not subject to any form of tariffs. This is one of the main reasons why Asian collectors are very visible and major buyers at the fairs in Hong Kong.
From May 17-20, over 67,000 visitors attended the contemporary art fair, ART HK, with 266 Asian and international galleries represented, and this week Christie's have reported strong sales from their May spring auctions. The level of informed interest in the art and antiques markets is continuing to grow and consolidating Hong Kong's position as the key entry point into the Asian marketplace.
The rewards of working with the expanding base of collectors in the East are significantly improving and my advice is to use Hong Kong to get to know Asia.
Fine Art Asia (www.fineartasia.com) runs from October 4-7 and is the only mixed fine art and antiques fair in Hong Kong's calendar.