The New York Times has a strange take on the story of China’s Taikang Life Insurance Co. taking a 13.5% stake in Sotheby’s. According to their reading of events, Chen Dongsheng is joining forces with Sotheby’s to shore up both company’s secondary positions. For Chen, China Guardian is shrinking in domestic sales as Poly Auction increases its sales (even as China experiences a crackdown on the kinds of corruption that has been enabled by auctions of art and antiquities under the Mainland Chinese system.)

Sotheby’s, according to the Times’s single source, is supposedly badly behind in access to the Mainland.

“There couldn’t be a clearer indication of the globalization of the market,” said Thomas Galbraith, an art market consultant at the Petraeus Group, an advisory firm in New York. […]

Sotheby’s, for its part, has been outpaced in China by Christie’s and needs a stronger bridge to reach potential customers there, said Mr. Galbraith, the art market consultant. In 2013, Christie’s beat out Sotheby’s to become the first international auction house granted a license to operate independently in China.

“Sotheby’s lost the battle to enter the Chinese market, objectively quite badly. But this may help them win the war,” he said. “Whereas China Guardian has fallen behind Poly in their international presence, and this deal changes that dynamic overnight.”
Above all, auction houses in China must adjust to the changing tastes of wealthy art buyers, who increasingly look abroad to fill their collections. Buyers here appear to be following a pattern already seen in Japan and other countries, where they initially concentrate on domestic art and then expand their focus, Mr. Galbraith said.

Galbraith’s line of argument is worth unpacking. First, the deal isn’t a sign of a global art market. That fact has long been without dispute. The deal is a sign of the opposite: the global art market’s dependence upon Chinese buyers at the very top end—and potentially on a broader cross-section of Chinese buyers in the future.

The domestic Chinese art market is something everyone talks about but no one has been able to seriously develop a strategy around. Since neither Christie’s or Sotheby’s is allowed to trade in Chinese antiquities—the vast bulk of the trade—there’s no battle to win. The fight has been over Mainland clients which both houses have. Those clients transact in Hong Kong primarily. A smaller portion at the very high end of the market also buy in London and New York.

Let’s not confine it to Chinese buyers. Among the biggest purchasers of art at auction over the past few seasons have been Chinese, Japanese and a now-suspect Malaysian of Chinese extraction. US and European buyers remain very important but Asian money currently has an important swing-effect on the overall perception of health in the auction market.

The Taikang/China Guardian deal would seem to be much more about the Chinese buyers getting access to Sotheby’s global reputation, especially the Western imprimatur of the rule of law. For the further development of the Asian art market, this is no small thing.

The deal looks more like Dalian Wanda’s pursuit of a 49% stake in the Hollywood studio Paramount than anything else. China’s rich are now buying pan-Asian Contemporary art. Those markets were developed in the West and then moved to Hong Kong where they’ve slowly taken pride of place in the Hong Kong auctions. Western auction houses have also helped locate and create a valuable market for the works of Chinese modernist painters like Zao Wou-ki and Chu Teh-chun.

Taikang/China Guardian is getting their stake in Sotheby’s on the cheap. With its foot in the door and a seat on the board of Sotheby’s, Taikang/China Guardian will have greater insight into what kinds of valuable tangible assets—art, wine, classic cars, gems and jewelry—can be developed next for the Chinese market.

Finally, the Chinese financial system lacks safe assets for rich Chinese to store their wealth in. China’s internal banking system is rife with debt. The domestic equity market is thin and has to accept the dictates of the party and government. Real estate in China has been an enormous bubble for many years. Globally valuable assets that are mobile and can be turned back into cash with some confidence are in great demand in China. The Taikang deal may help meet that demand over the long term.

Sotheby’s New Major Shareholder Is Already a Power in Chinese Art (The New York Times)