Since the reform and opening up, thanks to economic development and flexible policies, commercialization and marketization of the art industry have accelerated remarkably, leading to a vibrant and large-scale art trading industry in China. In particular, during the 21st century, China has been the global art market’s growth engine and a prominent representative for the emerging art market. Despite fluctuation amid the overall economic downturn in the past few years, China’s art market remains one of the largest in the world. Some scholars concluded that the Chinese art market has “completed the development trajectory which took European and American markets more than 300 years in less than 20 years,” thus it is lauded as the “most remarkable example” of transformation.

Previous studies

When studying the rise of the Chinese art market, mainstream academic research is mainly carried out from the perspective of economics and cultural industry, covering three explanatory dimensions. The rise of the art market is either seen as a by-product of economic growth and wealth, a result of social development and cultural progress, or a product of social differentiation and segregation.

In the meantime, overseas scholars such as Olav Velthuis, a professor of sociology at the University of Amsterdam, proposed viewing the rise of the Chinese art market as a “mimetic process,” which carries a tint of empirical sociology. However, their research focused more on micro-levels, such as the development and strategic practice of market entities like galleries and auction houses.

Distinct from this micro approach, this article attempts to provide a macro structural analysis. In short, the rise of a Chinese art market cannot be fully explained by the institutional characteristics of the market system itself, nor can it be limited to a micro analysis of the market’s internal organizational subjects. It is necessary to look beyond the structural forces and dynamic mechanism that shapes the Chinese art market. Instead, we take on a “market maker” perspective, which does not refer to micro-subjects in the market such as galleries and auction houses, but to key actors who shape the appearance, pattern, and evolutionary trajectory of the market as a whole.

To be specific, the state, capital, and local governments are the three most important “market makers” in the Chinese art market. The transformation of China’s cultural governance, the financial operation of capital, and competition between local governments regarding creativity and a “creative economy” constitute the triple dynamic driving forces inspiring the rise of the Chinese art market. Only by delving into these factors can we fully explain the evolution of the Chinese art market over the years.

Role of government

Prior to the 1980s, China’s cultural governance centered on ideology, which in the art field translated into making sure the “revolutionary realism” and socialist value orientations of cultural and artistic creation match through the distribution and control of resources within the government system. There was no room outside the system, so the art market had not yet formed.

Since the 1980s, with the development and expansion of the art market, China’s cultural governance trended towards industrialization, economization, and project orientation. At that time, government intervention in the art market varied, meaning that different governance strategies were applied to the dual structure of the art market—a market for contemporary art and one for traditional art (which included Chinese painting, calligraphy, and antiques). This, to a large extent, shaped the differences in appearance and character of the contemporary art market and the traditional art market.

For the contemporary art market, governance logic and strategies have gone through a relatively complex transformation process. The overlapping complexity and repetition of “encouragement” and “intervention” run through the social history and current reality of contemporary art governance. In the traditional art market, the government has adopted a relatively active intervention and guidance strategy. As such, China’s rise in the global art market is largely attributed to the traditional art market. Compared with the contemporary art market, the traditional art market not only occupies an overwhelming market share, but also has a more significant social effect and enjoys popular sentiment.

Involvement of capital

Overall, the rise of the Chinese art market is accompanied by a transformation from a consumer market to an investment and even a speculative market. This means that financialization has become a particularly important factor in the rise of the Chinese art market.

Here, “art financialization” refers to works of art, like real estate and a range of securities, becoming endowed with financial attributes and transformed into financial assets, so that art transactions and financial transactions are combined. Financialization includes art mortgages, art funds, trust investments, art property transactions, and so on.

The most fundamental characteristic of financialization lies in art’s value “shifting from real to virtual,” transforming physical artwork into financial products of non-physical assets, which can be traded or cashed out publicly. In other words, art is abstracted as a security, embedded in a financial loop that can be constantly circulated, traded, and appreciated. As a result, trade in the art market is mostly short-term and unstable, but it has a shorter cycle and higher profits, which is exactly in investors’ favor. However, financial operations for contemporary art are extremely risky and do not accurately reflect the real value of artworks, which explains why “art share trading,” a uniquely Chinese financial innovation, was suspended in 2011.

Art financialization exists because of uncertainity about the value of art, and evaluation of its value distinctly features social constructivism. So, what are the consequences of the financialization of art? As far as China is concerned, with growing speculation and its correlation to the financial market, the art market is increasingly volatile. At the same time, financialization also has an increasingly strong influence on the creation and evaluation of art.

Creative competition

If we agree that the transformation of China’s cultural governance provides opportunities for the art market, and the financial operation of capital shapes a high-speed growth model with a risk of bubble burst, then we must admit that regional governments’ competition to inspire a “creative city” and “creative economy” enhances the ecology and development of local art markets through urban renewal and regional planning strategies.

In the post-industrial era, culture and the symbolic economy have become a key strategy and theme for urban vitalization. Culture provides a vivid description for the competitiveness of a city, by improving its image and reputation and combining the city brand with cultural connotation. Therefore, creating a “creative city” has become an important development strategy for local governments. The creative city is based on the creative economy, which is seen as a primary driver for urban renewal.

By early 2021, 14 Chinese cities had been included in UNESCO’s Global Creative Cities Network. The competition to become a “creative city” and “creative economy” has become an important component of local government competition. In the local government’s creative economy system, the emerging art market and art trade are key players. In turn, such “creative competition” fuels the development and prosperity of the local art market.

In addition to a post-industrial economic transformation, the establishment of a “tournament system” by local governments also gives rise to “creative competition” among cities. By setting up special funds, local governments facilitate a combination of policy tools such as loan discounts, project subsidies, government purchases, and tax incentives, and the construction of cultural industrial parks to aid the development of cultural and creative industries.

In various kinds of cultural and creative industrial parks, the art gathering area formed around art production, consumption, and dissemination has become a special space. Also, art fairs and festivals have also become important means for local governments to develop the art economy. The rise of art fairs and festivals also reflects the conductive effect of “creative competitions” produced by local governments across China on the art market.

It must be noted that these three factors do not work alone but are very much intertwined. In the end, the interaction of these three “market makers” jointly shapes the Chinese art market’s pattern. Only by combining national governance, capital operation, and urban renewal can we gain an overall understanding of China’s art market. That said, the rise of the Chinese art market is not only an economic phenomenon, but also a complex political, economic, and cultural process amid a marketization transition. In this regard, the study of the art market is not only a research question within a certain branch of market sociology or art sociology, but also presents a way to understand contemporary Chinese society. In achieving this grand goal, this summary is simply a preliminary attempt to encourage further enquiry into the field of study.

Wen Xiang is an associate professor from the School of Sociology and Population Studies at Renmin University of China.