During the 70s and 80s, interest in arts and antiques from the China region came primarily from Hong Kong and Taiwan. However, as time passed and mainland China became and more prosperous, the tide turned. Or, to be more precise, while there is still quite a bit of interest originating from Hong Kong and Taiwan, mainland China has most definitely become a force to be reckoned with, especially when it comes to Chinese art and antiques but with the interest horizon broadening as well.
Why are Chinese investors fascinated by art and antiques? This tends to be a tricky question because there isn’t just one straightforward answer. Simply put, it happens for reasons which range from pragmatic to metaphysical ones, so it would perhaps be a wiser approach to simply go through some of the most important ones, in no particular order:
- Wealth preservation… think of them as an alternative to asset classes such as precious metals. In other words, central banks cannot simply print art and antiques at their leisure and as such, this asset class tends to be popular among those who want to protect their wealth against the frequently (but not always!) devaluation-oriented actions of the People’s Bank of China, actions which are a part of a much broader global trend of unorthodox monetary policy
- Wealth enhancement, especially in light of the fact that Chinese equities have been under-performing. At the end of the day, it would be a mistake to assume that art and antiques are somehow immune from basic human folly, primarily fear and greed. Just like there are investors who invest in anything from equities to cryptocurrencies for primarily or strictly wealth enhancement-related reasons, there are players who do the same in the art and antiques market
- Wealth “optimization” and capital flight or, in other words, anything from hiding their wealth to creating a framework for moving wealth abroad. As pointed out rather frequently here on ChinaFund.com, capital flight or (more generally speaking) the desire of investors to optimize their wealth (for tax purposes, protection purposes and so on) represents a top concern of the Chinese authorities… which shouldn’t exactly come as a surprise
- Diversification, plain and simple. Don’t assume that just because there are many dramatic cultural differences between China and the proverbial West, this automatically means there are no common denominators to be found with respect to investment-related behavior. Just like in the West, the idea of diversification is embraced by many investors. In light of the fact that Chinese investors, despite significant progress being made, still have considerably fewer options than their Western counterparts should make it clear why art and antiques are receiving attention for investment purposes
- Displaying wealth. We need to understand that widespread prosperity is a relatively new concept in China, especially compared to the richest Western nations. Quite a few Chinese citizens end up finding themselves with more money at their disposal than they know what to do with. Individuals who don’t exactly have a “tradition” with respect to wealth in the family and in many cases simply do what comes “natural” from an instinctive perspective. At the end of the day, humans are pack animals and seeking the approval of our peers is something that comes natural… it just so happens that even ostentatious displays of wealth get that job done. It may not be the most elegant approach but acquisition patterns such as luxury industry-related ones or art and antique-related ones speak for themselves
- Patriotism, plain and simple. In other words, wealthy Chinese individuals who use their wealth for what they consider to be the noble purpose of returning extremely valuable works of art or artifacts to China
… the list could go on and on.
At the end of the day, should you try to gain exposure to Chinese assets of the art and antiques category? For most Western investors, the answers is most likely negative. Not because the assets in question aren’t something one should consider investment grade (they most definitely are) but rather because doing well as an investor in art and antiques without being genuinely passionate about this asset class tends to be quite difficult. To put it differently: if you are passionate about art and antiques, this asset class can represent an excellent option for combining business with pleasure. Otherwise, you are most likely better off staying away.
But even in the absence of goals pertaining to somehow gaining exposure to these assets, understanding art and antiques from a Chinese perspective ultimately helps you become a better investor. Think of it as an endeavor you partake in out of intellectual curiosity more so than a pragmatic areas of interest. Fair enough?