The Chinese economy has been booming for the better part of 20 years now. From ignominious beginnings in the 1980s, China has evolved into the manufacturing powerhouse of the world. One consequence of this development is that a large number of consumer goods available in the West are made in China. Another is that Chinese GDP has skyrocketed, increasing from about $1.2 trillion in 2000 to around $11.2 trillion in 2016. As the Chinese economy has flourished, its stock, bond and property markets have also boomed.
For now, the money is flowing like water. And one of the things wealthy Chinese love to spend their money on is fine art and antiques. However, they tend to be fairly particular about the type of antiques they buy. Specifically, they have gone on a spending spree for Chinese antiques.
For most of the 19th and early 20th centuries, China was under the influence (or occupation) of the great Western powers. This era is referred to as the “Century of Humiliation” in China. It spanned the period from the start of the First Opium War against the British in 1839 to the final defeat of the occupying Japanese forces at the end of World War II in 1945. Many Chinese are deeply sensitive about the indignities suffered under foreign imperialism during this time.
One side effect of the Century of Humiliation is that large quantities of fine Chinese antiques and art were exported wholesale from the country. The British, French, Germans, Americans and Japanese all variously looted or purchased some of China’s finest art works during this time. These included superb Chinese ceramics, bronzes, jade carvings and lacquerware from the Tang, Song, Ming and Qing dynasties, among others.
Now that the Chinese economy is the second largest on the globe, rich Chinese are reclaiming their national heritage by buying back many of these Chinese antiques from abroad. For instance, a 17th century Chinese porcelain moonflask sold at Christie’s auction house in 2011 for a stunning $2.65 million. In the same year a Chinese scroll painting looted from the Forbidden City during the Boxer Rebellion sold at auction for a jaw-dropping $31 million. An unassuming late 15th century Ming dynasty ceramic cup decorated with chickens sold at Sotheby’s in 2014 for an almost unbelievable $36.2 million dollars. All of these works were repatriated back to a resurgent China.
Demand for fine Chinese antiques is even more frenetic than it would have been otherwise because of China’s Cultural Revolution between 1966 and 1976. During this dark time in Chinese history, Mao’s communist government attempted to stamp out traditional Chinese values, philosophy and culture, especially anything connected to the pre-1911 imperial era. Not only was collecting antiques impossible for Chinese during the Cultural Revolution, but innumerable pieces were mercilessly burned, defaced, shattered or otherwise destroyed during this shameful period in Chinese history. As a result, modern Chinese antique collectors are desperately buying the only traditional Chinese art that survived the Cultural Revolution unscathed – art from abroad.
Demand for Chinese antiques from the nation’s nouveau riche is so high that China recently surpassed the U.S. to become the world’s largest antiques market. Right now China appears to be an unstoppable art juggernaut. But while it might be fashionable to predict eternal Chinese dominance in both the economic and antiques sphere, the sad saga of Japan sounds a cautionary note for those willing to listen.
In the 1980s, Japan experienced its own economic miracle. At that time, the island nation was a major global exporter, delivering massive volumes of advanced consumer electronics and vehicles to countries all over the world. By the mid 1980s, this corporate success had morphed into a bubble of epic proportions.
The Nikkei stock index more than quintupled between 1980 and 1990. Japanese real estate also skyrocketed in value. The grounds of the Imperial Palace in Tokyo were reputedly worth more than the entire state of California. A high denomination, 10,000 yen banknote laid on the sidewalk in Tokyo’s posh Ginza neighborhood was worth less than the ground it covered.
Japan quickly became legendary as a land of financial excess. Rich Japanese housewives drank tea infused with gold leaf. Japanese salarymen spent lavish sums of money on food, alcohol and entertainment in Tokyo’s most exclusive nightclubs. Japan’s corporate titans used their great wealth to purchase trophy properties abroad, like Pebble Beach golf course in California and Rockefeller Center in New York City.
They didn’t limit themselves to just buying high profile foreign real estate, however. The Japanese also indulged their taste for expensive Western art. A Japanese insurance company bought a version of Vincent Van Gogh’s famous “Sunflowers” painting for $40 million in 1987. They were later outshone by a Japanese billionaire who paid $82.5 million for another Van Gogh painting. The sums of money involved were both surreal and utterly detached from reality.
And, predictably, the domestic Japanese antiques market also experienced a boom during the 1980s. How could it not? Both the stock market and real estate market were relentlessly rising. Money was meant to be spent and the future looked bright.
Then the unthinkable happened; the Japanese bubble burst. The economic malaise that followed is sometimes called “The Lost Decade”. This is an odd epithet because Japan’s economy has been limping along for over 25 years now, which is substantially longer than just a decade. Perhaps the Japanese engaged in wishful thinking when they originally named their economic disaster.
If Japan’s bubble experience in the 1980s sounds hauntingly familiar, it should. Japan’s bubble is almost a carbon copy of the Chinese experience today. While few people can spot the economic parallels between present day China and 1980s Japan, the similarities are glaringly obvious to those willing to look. Unfortunately, none of this implies good things about the future direction of the Chinese stock, property, or antique market.
In Japan’s case, all three of those markets collapsed and then stagnated for decades. As a result, Japanese antiques are currently some of the best values in the entire asset class. I highly recommend you snatch up some of these bargains if you have the means and inclination. However, while the situation has been great for bargain hunters that fancy Japanese antiques, it hasn’t been so great for people who bought Japanese antiques in the 1980s.
China, unfortunately, faces a very similar economic trajectory to post-bubble Japan. Those multi-million dollar auction results for Chinese antiques today will eventually look just as excessive as Japan’s art buying spree of the 1980s. Yes, the money is flowing like water right now in China. But reality always catches up with a bubble. Of course, the good news is that you’ll be able to pick up some great Chinese antiques for cheap in about 20 years.
