China is no longer the world's number one art market after its sales fell by a quarter last year, according to a recent survey.
Beijing's orders to rein in speculative activities and the exposure of art buyers dodging mainland import duties contributed to the 24 per cent decline in the auction and dealer art sales values. But it is viewed as a healthy adjustment rather than a catastrophic crash.
"This is what the market needed. The growth previously was unsustainable. This gives the market a chance to mature a bit," said Clare McAndrew of Dublin-based consultancy Art Economics, which conducted the latest global art market report commissioned by the European Fine Art Foundation.
The sales clocked up €10.6 billion (HK$105.4 billion), taking China's global market share from 30 per cent to 25 per cent. As a result, sales in the global art market declined by seven per cent to €43 billion from €46.1 billion in 2011.
It also meant the United States reclaimed its top position as the world's biggest art market with a five per cent rise in sales to €14.2 billion - 33 per cent of the global market share.
Britain stayed in third place with a market share of 23 per cent.
McAndrew said China's decline was "demand driven", explaining that mainlanders had less money to spend on artworks as tighter domestic monetary policy led to an economic slowdown in China.
The decline in China's market also reflected the results of Beijing's determination in tackling speculative activities in the art market.
At last year's National Finance Working Conference, former premier Wen Jiabao had warned that trading in fine arts and crafts must be strictly regulated. Last year, customs authorities in Beijing also revealed unpaid import duties on artworks that amounted to 10 million yuan (HK$12.35 million).
McAndrew said the supply of quality artworks was also hit as people wanted to wait until prices improved. That was reflected in the staggering fall in China's auction market.
Auctions accounted for nearly 70 per cent of art sales in China, but sales dived by 30 per cent from €9.8 billion in 2011 to €6.9 billion last year. Some 81 per cent of the sales were artworks valued at more than €50,000.
McAndrew said despite last year's decline, China's market still clocked up the world's strongest growth in the last five years.
"However, the retail sector is still underdeveloped in China," she said, adding that the lack of regulations and transparency in the auction market were the biggest problems.
This week, Hong Kong sees the spring auctions by Sotheby's (April 3 to 8), China Guardian (April 4 to 5) and Tiancheng International (April 6).