China's artwork auction market is marred by irregularities such as fake authenticity certificates, collaboration between buyers, sellers and auctioneers to push up prices, and illegal charges on the sellers, state media has revealed.
A recent Xinhua report said irregularities and fake deals were rampant, particularly among small auction houses. In extreme cases, art auctions have been used for money laundering.
Or they can be a front for bribing officials - a process that begins by persuading the official to put an artwork up for sale. Then the briber buys the artwork at a highly inflated price, Xinhua quoted Zhang Ning, deputy chief of the Chinese Cultural Relics Academic Society's committee for cultural relics appraisal, as saying.
In some cases, an artist may hire someone to buy his own work at an inflated price, hoping that will boost the price of his work in future.
Xinhua quoted a famous painter, Han Meilin, as saying that he had received so many complaints from people tricked into buying fakes of his work that he was sometimes forced to paint genuine works for the victims. He has had lawyers send letters to auction houses to stop them from putting fakes up for auction.
Another form of unethical behaviour involves employees who buy on behalf of a company. The employee may reach a deal with the seller before the auction, then collude with the auction house to push up the price during the bidding. The employee then splits the difference between the prearranged price and the inflated bidding price with the seller and the auction house.
'Such corruption and money laundering exists in any industry,' Bian Yiwen, general manager of Beijing Johan Auction, said. 'But the industry shouldn't be completely demonised for this.
'Markets can naturally eliminate players who follow irregular procedures amid tight competition. We shouldn't be too reliant on the government to step in, because sometimes they are powerless to face problems like this.'
These revelations come as a number of artworks, both modern and ancient, have fetched sky-high prices at auctions on the mainland and in Hong Kong, grabbing media headlines in recent weeks. A painting with calligraphy by Qi Baishi set a record for modern art and calligraphy on the mainland when it sold for 425.5 million yuan (HK$511.8 million) at auction last month.
The spring sale by Poly International Auction, a top mainland auction house, fetched revenues of more than 6.1 billion yuan, the highest total for Chinese art in one season. Among the auctioned pieces, Zhichuan Relocating, a wash painting by Wang Meng, a 14th century Yuan dynasty artist, fetched 402.5 million yuan - the highest price for an ancient calligraphy-and-painting combination auctioned this year, Poly said.
It is also common for small auction houses to cheat sellers who think they have found an antique treasure in a flea market. Although the auctioneers can see the work is not genuine, they tell the seller it is authentic and persuade them to put the work up for auction at a high price.
They further persuade the seller to pay them several thousand yuan in handling fees and printing costs for brochures. But the items are never sold since experts quickly spot them as phonies.
Ouyang Shuying, deputy director of the publicity department of the 1,600-member China Association of Auctioneers, said allegations of irregular behaviour were not entirely groundless, but she said not every auction house was involved in such irregularities.
She believes the artwork market in general will not be damaged by a handful of cheaters. 'China's economic power is on the rise and the auction industry has improved its abilities compared to 1992, when it began,' she said.
'Although some isolated problems occurred as the auction market developed, it's not fair to blame the whole industry for problems in some individual auctions that are not run properly, or some cultural companies that are not qualified to run an auction business.'
The problems occurred mostly at smaller auction houses, according to a marketing employee with Poly auctioneers, who declined to be named, saying: 'The big names don't trick clients like this. Large auction houses don't charge commissions or promotion fees before deals are made.'
The Xinhua report raised yet another question about the fledging art market. It said the taxes paid by the top four auction houses - Poly, Guardian, Hanhai and Council - were much lower than they should have been based on their announced turnovers last year.
A lawyer named Ai Lianqing was quoted by Xinhua as speculating about whether the auction houses had been evading tax. If not, then their announced revenues could have been inflated, Ai said.
The Poly employee said the problems were the result of delayed or instalment payments. 'For instance, some sales in December are paid the next year, so the tax is not included in that year's statistics. Some buyers prefer paying by instalments, with the sellers' permission. In that case, some transactions are not completed until a certain period has passed.'
The auctioneers' association has issued guidelines for art auction houses, and plans a self-inspection campaign and public education week. 'Some auction houses refused to join the evaluation we organised based on their tax and turnovers, simply because the truthfulness of their business achievements cannot bear scrutiny,' Zhang Yanhua, the association chief, told Xinhua.