The South China Morning Post reports that Mainland Chinese art collectors are having a harder time buying art in Hong Kong this week due to stricter capital controls:
“The impact of [capital controls] is very significant if you want to buy more paintings,” said Laura Chen, who came to the fair from the mainland.
That is because Chinese nationals are only allowed to convert and freely remit up to US$50,000 or its equivalent per year, an amount that can easily be breached with just a few artworks. A larger amount would need approval from SAFE. The implementation of the policy has also recently become stricter.
So how are they dealing with the problem? Reuters says they’re paying in installments with 40% of dealers having to accept payment beyond 2 months leading to these awkward situations:
Hong Kong-born Pearl Lam, who runs her own contemporary art galleries around Asia, said China’s capital controls had prompted many galleries to allow customers to pay in installments but the repayment periods had sometimes been stretched to up to three years with others not able to pay at all.
“A lot of us have got into problems because somewhere in the middle they cannot pay. So the problem is after you take a certain percentage and then they cannot follow up. What do you do? You cannot sell the painting,” Lam told Reuters in an interview.
Another dealer said 20% of their clients were paying over time, including one who structured $150k in payments over six months. Then there is this case:
A Chinese art trader based in Hong Kong said last March a buyer bought 20 items worth HK$100 million ($12.88 million) but still had not completed payment a year later, stating it was difficult to send the money out of the mainland.
Hong Kong art market takes hit from Beijing’s efforts to curb capital outflows (South China Morning Post)