HONG KONG, March 24 (Reuters) - As visitors sip champagne at
Hong Kong's Art Basel event this week and take selfies with
replicas of deceased leaders Fidel Castro and Mao Zedong, a more
urgent issue is rumbling through dealers exhibiting – how big an
impact China's capital controls will be in the coming year.
Over the past six months, Chinese buyers have faced larger
constraints to get money out of the country, as the government
increases scrutiny on capital outflows and steps up measures to
bolster its yuan currency.
Typically, Chinese collectors had circumvented restrictions
by using methods including underground banking but galleries
attending Art Basel and Hong Kong's Art Central exhibitions said
getting money out of the mainland had become much harder.
Hong Kong-born Pearl Lam, who runs her own contemporary art
galleries around Asia, said China's capital controls had
prompted many galleries to allow customers to pay in
installments but the repayment periods had sometimes been
stretched to up to three years with others not able to pay at
"A lot of us have got into problems because somewhere in the
middle they cannot pay. So the problem is after you take a
certain percentage and then they cannot follow up. What do you
do? You cannot sell the painting," Lam told Reuters in an
Chinese buyers have been a huge boon to the global art
market despite slowing sales in 2016, accounting for 20 percent
of global sales by value according to an Art Basel Market report
released on Wednesday. The global art market achieved total
sales of $56.6 billion in 2016.
Buying through private dealers rather than via auction
houses has also been increasingly common but non-payment and
late payment remain crucial issues in the Chinese market, the
report said, citing an average of 40 percent of dealers forced
to accept payment terms beyond two months.
Hong Kong is a key centre for art transactions due to the
absence of tax and an independent currency which is pegged to
the U.S. dollar. However the number of mainland buyers attending
the fairs this week in China's special administrative region was
notably less, dealers observed.
Often wealthy Chinese customers have assets outside China
which they can use to pay for the artwork but China's
restrictions on capital have become more blatant over the past
few months, said Charles Fong, a gallery manager at Parkview Art
"We can feel it. It has become tighter and more and more
people have started asking to pay in installments."
Fong said around 20 percent of their customers paid in
installments and gave the example of one customer who bought a
HK$1.2 million ($154,500) painting recently but split the
installments over six months.
A Chinese art trader based in Hong Kong said last March a
buyer bought 20 items worth HK$100 million ($12.88 million) but
still had not completed payment a year later, stating it was
difficult to send the money out of the mainland. The trader
could not be named due to company policy.
At Art Basel on Friday, mainland tour groups, students and
international visitors crowded around the art installations.
A suited Chinese man who gave his name as Wu said there were
always ways to get money out of China, but acknowledged it was
harder for big-ticket items.
"For small amounts its not a problem. If it's a lot, you
just need to do individual payments, for example every month or
For mainland-based galleries which accept yuan, like Pékin
Fine Arts, capital controls were a non-issue, said founder Meg
Maggio, who has been in China for more than 30 years, said
the mushrooming of galleries and the strength of consecutive art
fairs showed the scene was booming.
"It's a win-win, plus-plus situation."
($1 = 7.7665 Hong Kong dollars)
(Reporting by Farah Master and Venus Wu; Editing by James