Chinese Auction Houses: More Than Just Culture Shock!

The mad scramble by Western entrepreneurs and businessmen to “get into the China market” leaves visible scorch marks across the globe that are probably so pronounced they can be seen from outer space. But the Chinese didn’t build the Great Wall for nothing—the Middle Kingdom has always been insular and, in many ways, still is. Despite the fact that China seems to be overrun by Westerners busy doing their thing, few actually manage to succeed in the Chinese market.

The “open door” policy of Xi Jinping—the General Secretary of the Communist Party of China—is in reality simply one big bluff. For though it is easy to get over the Chinese Wall today, there is another wall which is far more challenging to climb and to reach the other side.

Red carpets and canapés: an auction preview at Sotheby’s Beijing facility.

Red carpets and canapés: an auction preview at Sotheby’s Beijing facility.

It is no secret that China is a totally other culture to the West, but this mad quest of Westerners is, in the main, futile, for most fail to realize how complex and totally different the Chinese culture actually is. There is no culture in the West that comes even near. Complicating the matter is the West’s lingering arrogant superiority complex in regards to other cultures and people; a mindset impedes any instinct to study and understand Chinese culture—the largest and one of the oldest surviving civilizations on earth. “The West” is not actually a civilization; it is simply a conglomerate group of people from different nations in the Western Hemisphere, the roots of which are somewhat mongrel at best.

If one thinks of the Chinese culture as complex, the Chinese psyche is far more intricate, convoluted and totally rooted in thousands of years of an evolved philosophical mindset. History clearly demonstrates how advanced China was to anything in the West, in particular during the Tang and Sung Dynasties. Study of that part of history, no matter how cursory, quickly shows there is no reason whatsoever for the West to feel in any way superior. The Chinese culture may be different, but it is highly sophisticated and not something hastily manufactured in the 18th and 19th centuries as a result of a latent aristocracy and a new affluent middle class that aspired to the former as being Western culture as we know it was.

To understand how auction houses operate in China, one should first take a look at the China Trade in the 18th and 19th centuries. With the benefit of hindsight, one can say that the China Trade was a unique international commerce phenomenon that had no comparison anywhere in history. It had a chemistry all of its own that resulted from a convoluted bringing together of greed, trade, opportunism and corruption. Only those closely at the heart of it truly understood it, and most probably few ever fully did, given that it had an unstoppable momentum. Although that toxic mix may sound familiar to many today, the chemical formula of the China Trade has never been replicated and most probably never should or could.

The Canton System was devised by the Imperial Court to regulate and control trade within Canton under the guise of a new “open trading” policy and was really intended to maximize tax revenues for the Imperial coffers. “Imperial control” was the operative phrase here and the state control in China today of the so-called “open world” policy has many similarities—perfectly logical given Xi Jinping’s latest advocacy of China “getting in touch with its cultural roots.”

General Secretary of the Communist Party of China Xi Jinping, “getting in touch with its cultural roots.”

General Secretary of the Communist Party of China Xi Jinping, “getting in touch with its cultural roots.”

The Canton System never really delivered what it said on the label inasmuch as it was as far from being a system as we might know it. If anything, it was systematic chaos. To be able to conduct any business within the China Trade at Canton, one had to enter a murky morass of corruption and double-talking that appeared so convoluted to newcomers, but was perfectly normal to those engaged in it on a daily basis. The Canton System came to an abrupt end more than 170 years ago; the murky morass of corruption and double-talking sadly continues, as the general status quo in the world of Chinese auction houses today.

Chinese auction houses are dominated by two juggernauts; there is also a blurring of state and commercial interests and a vague opacity in business at best. China Guardian, the world’s fourth-largest auction house, is in fact privately owned, in contrast to the country’s biggest auction house, Poly International, which is owned by an arm of the Peoples’ Liberation Army. By “privately owned,” it means that China Guardian was co-founded in 1993 by Wang Yannan, who just happened to be the (confusing; maybe a dropped word here?) mad scramble by Western entrepreneurs and businessmen to “get into the China market.”

Together, these two companies form a singular auction monolith that no other auction house operating within China has a hope of even coming close to when one is referring to the ubiquitous “Chinese market.” Both houses present slick international images outside of China; both are also on a quest to consolidate substantial additional peripheral holdings and international standing in the West: Poly, by following an acquisitions path by focusing its sights on smaller international houses—one being rumored to be Bonhams; and China Guardian by opening international offices in New York, Tokyo, Hong Kong and Vancouver with a view to to represent major world-class private collections brought to auction and to access major Chinese art and artefacts held overseas.

These glitzy international images are not, however, how either house appears in China. Established international auction giants Sotheby’s and Christie’s both operate in China from China-based offices, the previews of their auctions resemble red-carpet celebrity gala events where the A-List celebrities of Beijing and Shanghai parade in their finery—while canapés and champagne are passed around by equally stylish aspiring models. Attractive and highly knowledgeable Chinese experts glide about waiting to be approached by eager aspirant Western buyers asking questioning which they believe will be kept highly confidential. In stark contrast, China Guardian and Poly previews take place in utilitarian Mao-period hangar-like buildings that have long-since seen their heydays. Dressing down is very much the style of the masses that pour in to visit (and canapés are replaced by vending machines, at best). What appear to be frighteningly juvenile staff with white gloves and ill-fitting uniforms, zero art history knowledge and mostly only Mandarin language skills stand between prospective buyers and objects d’art (one uses the term loosely), which appear in rows behind locked cabinets of grimy glass.

China Guardian’s new Beijing headquarters, located opposite the National Museum of Art.

China Guardian’s new Beijing headquarters, located opposite the National Museum of Art.

For the more observant among you, it will be clear the China auction scene is one of two extremes. Both have their own vibrancy and levels of dynamism, but only one is probably all it seems.

There are in excess of 400 auction houses operating in China today, but it is important to stress that Chinese auctions and auction houses operating in China are extremely highly regulated and scrutinized by the government. For virtually every function an auction house provides or services it offers, there is a least one government license required. In many cases, multilayered licensing is necessary, none of which are issued automatically and most are hard to come by. Few Chinese auction houses boast a full hand of licenses. Foreign-owned auction houses are at a distinct disadvantage and are highly unlikely ever to hold a full house.

Scheduled auction dates for an entire year have to first be submitted for approval and, once approved, those dates are set in stone and cannot be canceled or rescheduled. Failure to hold a scheduled auction results in total loss of licensing. All lots for any single auction have to be submitted three months before to a government regulator, along with full documentation and relevant taxes, pre-paid, of course. Documentation includes proof of ownership by the consignor. Failure to comply results in severe fines and possible loss of license—this includes incorrect descriptions or descriptions for lots that cannot be proven. An entire SWAT team descends on the auction house to go inspect every paper and all relevant accounts. Checks are made as to whether individual lots contravene the stringent laws to protect anything deemed to be a “cultural relic.”

By Western standards, these regulations are unparalleled. They are also intended to be mandatory, with a zero-tolerance level of implementation. At least theoretically. Among the Chinese auction house fraternity—those not part of the China Guardian/Poly elusive club—it is generally known but seldom spoken of in public that sales figures posted by both the latter are prone to have a somewhat spurious quality to them, while the level of detection of fake items that appear in auction lot schedules is remarkably low. It is an interesting state of affairs, given neither is tolerated in any of those belonging to all other houses. Yet these two giants have not hidden their aspirations for owning and operating houses in the West. Acquiring existing Western auction houses cannot become a smoke-screen that could foster a modus operandi that is definitely not of a Western standard.

An auction at the China Guardian in Beijing.

An auction at the China Guardian in Beijing.

Of the medium to smaller auction houses in China, a significant number are owned by high net-worth individuals who have no previous connection with the auction or art worlds. Some of these owners may have an interest in collecting, but certainly lack any auction management skills. Such houses might better be regarded as being “trophy” possessions that could even be perceived as expensive hobbies. To build an auction house system on such tenuous foundations is both dangerous and irresponsible, and would certainly not be tolerated in the West. As a result, auction houses in China tend to come and go, magically reappearing in another guise, name and management/ownership structure.

The overall scene described thus far could well be likened to the most grueling obstacle course on earth, undertaken by blind-folded contestants! However, the yawning gap between Western and Chinese culture remains another challenging area with few reliable road maps available to the intrepid Western adventurer, despite a myriad of “Dummies Guides” to doing business in China. These guides and the numerous courses on offer are next to useless and have become a new micro-industry that deliver not a lot more than profit for the operator.

For a country that is so highly regulated and self-scrutinized, there really is no rule of law in China that any Westerner might recognize in regards to auction houses. Promises are made and contracts handed out to Westerners who have been lulled into false senses of security, probably after hours of smiling faces, endless meetings, lunches, dinners and highly inflammable tot glasses of Baiju.

But there can be a whole other side to Chinese behavior that appear to Westerners as being ruthless but belong to a peculiarly Chinese sociological concept—mianzi (a.k.a. keeping face). Mianzi comes at the very top of the social behavior agenda of most Chinese, yet to most Westerners, it is a total enigma; an alien concept.

In the context of a playing field of 1.4 billion people, the odds against a single Westerner or Western entity are not looking good. Meanwhile, the Chinese do not seem to have any problem conquering the Western playing field. Are we therefore looking at a future global Chinese playing field where auction houses will operate under Chinese ground rules rather than those entrenched in Europe since the 17th century?

Adrien von Ferscht is an Honorary Research Fellow at University of Glasgow’s Scottish Centre for China Research; Lead Researcher at The Chinese Silver and Metallurgy Research Hub; Member of the Academic Committee of the Academy for International Communication of Chinese Culture at Beijing Normal University; Fellow of the Asia Scotland Institute at Edinburgh University.

His ever-expanding website, Chinese Export Silver, is the largest online information resource on the subject. His new 250-page Third Edition of the “Collector’s Guide to Chinese Export Silver 1785-1940,” is the largest information reference resource for this unique silver category. The single purchase price acquires the Catalogue plus all subsequent editions free of charge. Adrien also encourages people to share images and ask questions at

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