Chinese tycoon's company now Sotheby's biggest shareholder

Chen Dongsheng.

BEIJING • Three decades ago, Chinese tycoon Chen Dongsheng became enchanted by televised glimpses he caught of Europe's opulent auction houses. When one of van Gogh's Sunflowers paintings sold in London in 1987 for US$39.9 million (S$53.6 million), the merging of art and wealth left a deep mark on him.

"The images of the auction on television seemed inconceivably distant from my own life," Mr Chen wrote in his memoir. "So aristocratic, so refined. For China, an economically backward country that had never shaken off its revolution, the disparity with those scenes on television was too much."

Now, though, in a confirmation of how far he and China have risen as forces in the art business, he has emerged as a major player in the future of Sotheby's, the auction house he long dreamt of emulating.

Taikang Life Insurance, of which he is chairman and chief executive, disclosed last week that it had become Sotheby's biggest shareholder, with 13.5 per cent of its stock after a string of purchases.

"There couldn't be a clearer indication of the globalisation of the market," said Mr Thomas Galbraith, an art market consultant at the Petraeus Group, an advisory firm in New York.

Mr Chen has long been a powerful player in China's market for fine arts and ancient artefacts. Taikang's biggest shareholder is China Guardian Auctions, a company that he helped found in 1993.

"I want to create China's Sotheby's and I want to recreate China's cultural aristocracy," he told a Chinese newspaper two years ago. So far, he has not commented publicly on the announcement about Sotheby's.

Despite his high-culture aspirations, Mr Chen, 58, is minor Communist nobility. His father was a People's Liberation Army soldier and his wife Kong Dongmei is a granddaughter of Mao Zedong. He has described auctioneering as a patriotic cause to protect China's heritage, but he also supports contemporary art. He has been an advocate of market forces, but established himself in businesses - art sales and insurance - that required keeping wary regulators on his side.

Ms Meg Maggio, the director of Pekin Fine Arts, which has galleries in Beijing and Hong Kong, said it would be foolish to dismiss Mr Chen and his team as new arrivals with cash but no expertise.

"Mr Chen is an ambitious powerhouse," she said. "These are far from neophytes. These are sophisticated, savvy art-world veterans."

Sotheby's has its own operations in China, including offices in Beijing and Shanghai, and an additional office in Hong Kong, where it competes with Guardian and other auction houses.

Art investors and gallery owners in China said they would be watching to see how far Taikang's stake in Sotheby's would translate into cooperation between the two companies and perhaps Guardian Auctions as well.

"This might give Sotheby's an important ally in China," Ms Maggio said. "Guardian also needs a strong overseas presence."

Taikang has said it has ideas for possible members of Sotheby's board and if Mr Chen is nominated, he will not need tutorials about how the company works. When he quit as an editor for a government-run magazine and plunged into auctioneering in the early 1990s, he copied Sotheby's, right down to the fine points. He borrowed a video camera, visited a Sotheby's auction in Hong Kong and furtively recorded the proceedings.

"I was scared that they'd say something and videoed on the sly, my legs and hands shaking," he wrote in his memoir, published in 2014. Back in Beijing, he and his colleagues studied the video in all its details, down to the design of its bidding paddles.

In the decades that followed, Guardian prospered as China's newly wealthy created a booming market for fine art.

Now Sotheby's and Guardian have strong reasons to turn to each other. The Chinese economy has slowed, as have art sales. Sales of contemporary Chinese works, for example, fell in value by 41 per cent in 2015 compared with the year before, according to a report from Deloitte.

In the race to adapt, Guardian has been outmanoeuvred by Poly Auction, a state-backed firm that has surged ahead of rivals while also generating disquiet in the industry about its opacity. Poly reported its sales last year rose by 19.1 per cent compared with 2014 while China Guardian recorded a 5.6 per cent decrease, according to the Deloitte report.

Sotheby's, for its part, has been outpaced in China by Christie's and needs a stronger bridge to reach potential customers there, said Mr Galbraith, the art market consultant. In 2013, Christie's beat Sotheby's to become the first international auction house granted a licence to operate independently in China.

"Sotheby's lost the battle to enter the Chinese market, objectively quite badly. But this may help them win the war," he said. "Whereas China Guardian has fallen behind Poly in their international presence and this deal changes that dynamic overnight."

Above all, auction houses in China must adjust to the changing tastes of wealthy art buyers, who increasingly look abroad to fill their collections. Buyers here appear to be following a pattern already seen in Japan and other countries, where they initially concentrate on domestic art and then expand their focus, Mr Galbraith said.

In November, Mr Liu Yiqian, a former taxi driver-turned-billionaire art collector, bought a painting of a nude woman by Amedeo Modigliani for US$170.4 million at a Christie's auction in New York. Art Basel, a major fair for contemporary art, has sought to draw in more Chinese buyers through an annual fair in Hong Kong.

Taikang is not the only investor angling to win more value from Sotheby's. Shanda Payment Holdings, a company in Singapore, received approval in May to raise its stake, Bloomberg reported. Third Point, a hedge fund that has been Sotheby's biggest shareholder, fought two years ago to shake up management of the auction company.

But Mr Chen has cast himself as a serious patron with a long-term view. Taikang runs its own airy, contemporary gallery in a part of north-east Beijing dense with galleries. Guardian has commissioned the firm of Ole Scheeren, an avant-garde German architect, to build an art centre within walking distance of the Forbidden City.

"Entrepreneurs are the guardian spirits of great art," Mr Chen said last year. "Without commerce, there is no art because if art has no value, then nobody will go to enjoy it."


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A version of this article appeared in the print edition of The Straits Times on August 03, 2016, with the headline Chinese tycoon's company now Sotheby's biggest shareholder. Subscribe