This look at Zao Wou-ki market over the past 12 years—based upon data from our friends at Pi-eX—is available to AMMpro subscribers. Monthly subscriptions begin with the first month free. Feel free to subscribe and cancel before you are billed. **The original version of this post contained some charts with erroneous data. We have since had the data cleaned and corrected. The substance of the analysis has not changed.

In late May we published a brief post about the Zao Wou-ki market prompted by some claims on Instagram that the Chinese artist’s market had been jump-started by a joint show of his work alongside the work of Willem de Kooning organized by Lévy Gorvy in January 2017 before it traveled to Hong Kong. This prompted a bit of angry email from some readers. They stated, rightly, that the Zao Wou-ki market was not the product of a show comparing the artist to one of the West’s great abstract artists.

We promised, at the time, to offer a more detailed analysis of the Zao Wou-ki market that would continue to make clear that Asian buyers were not taking their cues from New York gallerists. Before we get to some charts, let’s examine the boldest claim on Instagram. Brett Gorvy used the post hoc prompter hoc fallacy to suggest that his January 2017 show had provoked the successive sales of four works just below or above $20m. In his post, Gorvy described it in this way:

• This show was followed with a succession of record prices at auction, with Zao Wou-Ki consistently breaking the US$20 million mark over the past year especially

The word consistently is misused here. Used properly, consistently would mean that all of the Zao Wou-ki works sold in the year after the show would have achieved prices above $20m. What Gorvy means is that Zao’s work has continually or regularly been able to break the $20m barrier.

Was that caused by Lévy Gorvy’s masterly presentation of Zao as a peer of Willem de Kooning? There’s no evidence to support such a claim.

Two of the four works—Et la terre était sans forme and 14.12.59—that made prices near or above $20m this were previously sold in 2007 for very similar prices of $3.7m. The work that achieved the highest price had been bought from artist’s estate before being sold again at Christie’s in the Fall of 2017.

For us to believe that de Kooning comparison was moving the Zao market, we would need to see some evidence that a work from the Lévy Gorvy show or a work with strong affinity for de Kooning’s work would have to be among the top works sold in the last 18 months. So far, no one has made that case.

Far more important for our purposes is that there is a stronger indication of what’s driving the Zao Wou-ki market that is wholly separate from Western artists and tastes. Chinese buyers may be more interested in de Kooning now than ever before but their estimation of Zao Wou-ki remains fairly consistent. Prices are rising more as a function of cash available to spend on art in Asia.

Zao’s market has been driven by Chinese buyers, especially buyers from Taiwan and a prominent collector from Singapore. There’s growing interest from Mainland buyers making many of the sales more competitive. The fact that two of the four top selling works were re-sales from 2007 suggests a market driven more by internal dynamics. In other words, works that had been validated by strong auction sales ($3.7m for a Chinese artist’s work was a very strong price in 2007) were re-sold 11 years later to buyers looking for esteemed works.

From 2007 to 2018, the Zao market rose in volume to a peak in 2013 and 2016 of six times the volume seen at the beginning of that period. Although that measure of volume doesn’t translate directly into the valuation for individual works, it is noteworthy that both works that rose in value from $3.7m to ~$22-3m is approximately a six-fold increase. So those works seem to be tracking the overall Zao market as a whole.

This chart from our friends at Pi-eX shows the last 11 and a half years of the Zao market shows the peaks in ’13 and ’17. Though with 2018’s sales only reflecting the first half of the year, the next peak is likely to be in 2018 or later. We’re showing the sales volume by sale location to emphasize the concentration of the market in Hong Kong and Paris. Another reason to discount Gorvy’s claims is this geographic distribution. Lévy Gorvy has no discernible influence on the Hong Kong market yet there is where the sales growth has come from during the period Gorvy wants to claim influence over.

From Pi-eX’s analysis, we can learn that guarantees have played a very small part in the Zao market. Demand is sufficient and prices have risen with such regularity that sellers do not have to be persuaded to part with their works. When they do make that decision, they’re unlikely to off-load the risk to an auction house or a third-party guarantor. That seems to be changing slightly in the first half of 2018 and may be substantially impacted by the sale of Juin-Octobre 1985 in Hong Kong at the end of September.

Finally, and this may be the most important chart given the claims we’re examining, we have a chart of the value of each year’s sale by price band. Notice the growth of works sold above the $3m level. The first year to see significant works estimated above $3m was 2011. Two years later, that class of work increased dramatically driving the value of the sales upward. If Sotheby’s is successful with their Fall sales of Zao’s work, this band will explode upward for 2018.

A few more points to take from these charts. There was a retreat in the market for two years. Over that period, however, the number of works estimated over $3m increased over three years until the majority of the value in 2017 was driven by these high value works. Since 2017, the Zao market has shifted to higher value works. Looking at Pi-eX’s charts of average lot performance and overall auction performance, we can see that the period from 2014 to 2016 were years of consolidation in the market.

From 2009 to 2013, average and overall performance of Zao Wou-ki’s lots at auction exceeded expectations. Bidders were active and aggressive in acquiring works. The top 18 works sold in 2013 had prices over $3m. But fewer than half of those 18 works, or seven lots, went to the block with low estimates above $3m. Those prices also seem to have briefly exhausted the market in 2014, a year where Chinese economic growth slowed substantially. 

Both of these charts show that Zao market at auction substantially reset expectations in 2014. The average and aggregate high estimate for that year was set at the previous year’s low estimate. Even in a challenging economic environment, buyers were able to perform toward the high end of the range. That success might have been a bit of market head fake as auctions of Zao’s work in the period 2015-2016 struggled to reach the low estimates in that period.

It was only in 2017 that the market began to out-perform setting up this year’s impressive growth.