Last year, Christie’s, Sotheby’s, and Bonhams made bullish investments in Hong Kong, opening new headquarters even as demand for art in China flagged. This was in keeping with tradition. Business-friendly Hong Kong has long been the preferred base of operations for Western auction houses and galleries looking to serve the world’s second-biggest art market. Since operating in mainland China entails navigating greater cultural differences, potential censorship, and bureaucratic hurdles, Western firms have tended to engage there only via art fairs, local sales representatives, and museum collaborations. All four mega-galleries—Gagosian, Hauser and Wirth, David Zwirner, and Pace—have locations in Hong Kong, but none has a branch in mainland China.
The rare Western galleries with physical footprints on the mainland lean European, with Lisson Gallery, Perrotin, and Almine Rech being the most notable examples. What has drawn them there, and how are they making it work?
The Value of Local Expertise
For London-based Lisson, which expanded to Shanghai in 2019 and Beijing in 2022, entering China was about more than sales. Lisson represents revered Chinese figures like Ding Yi and Yu Hong, and, according to partner Greg Hilty, “always planned to build a connection through artists, through the community” there. David Tung, previously deputy director of Shanghai’s Yuz Museum, was chosen to spearhead Lisson’s expansion in China because “he had a very good understanding of the Chinese scene as well as the Western scene,” Hilty said.
Uli Huang, of Perrotin, which opened in Shanghai in 2018, said, “Whether you do well in a certain region is deeply connected to how well you understand the people that you’re trying to do this business with.” At first, he said, Emmanuel Perrotin “constantly, well-intentionally critiqued our style or our way of doing things. And through time he realized, oh, our method actually works better.”
Galleries in China face a mercurial regulatory environment. As Huang put it, “Any policy changes, any loosening or tightening of the grip, when the grip is being tightened, everybody knows. When the grip is loosened, there’s no top-down process in terms of telling everyone, ‘Oh, we’re loosening our grip.’” Responding to these shifts requires extreme perceptiveness.
Taxes remain a significant barrier to entry. Evelyn Lin, president of Greater China at Pace, said that Hong Kong’s tax regime makes it more attractive for dealers. “I think the fact that all the major auction houses have their Asia headquarters in Hong Kong really tells everything,” she said. Artworks brought into China are generally subject to a 1 percent import tax and then a 13 percent value-added tax: 14.13 percent in total. Sales taxes or V.A.T. vary across U.S. states and E.U. nations, but all generally fall beneath China’s. Hong Kong does not impose sales tax or VAT on artwork sales, nor does it have customs duties on artwork imports.
Pace was actually an early entrant in mainland China, running a space in Beijing’s famed 798 Art District from 2008 to 2019. At the time it shuttered, the gallery’s founder, Arne Glimcher, told ARTnews, “It’s impossible to do business in mainland China right now and it has been for a while.” He cited trade-war tariffs (which are back once again), anti-consumerist political sentiment, and the unfavorable tax policies.
Then there is the question of censorship. When asked if political restrictions impact Lisson’s Chinese program, Hilty said, “We work through the laws and the protocols wherever we are. We know what they are in China… I feel that we’ve been very fortunate, or just careful, to present our program in the best way, but it doesn’t feel like we’ve compromised in terms of what we present in China.”
Choosing a Base of Operations
Tung, of Lisson, is a big proponent of Beijing, and said that “60 to 65 percent of the auction turnover in China happens in Beijing. It’s the largest concentration of galleries, artists, art professionals, including art media, in mainland China.”
On the other hand, Francois Ho, of Almine Rech, and Huang, of Perrotin, are bullish on Shanghai. According to Huang, “the Shanghainese government is very, very supportive toward cultural programs,” pointing to international partnerships that it has forged for some of its smaller, state-affiliated museums.
Western galleries in Shanghai have clustered together. Almine Rech, Lisson, and Perrotin all operate out of the same historic building in the upmarket Huangpu District. “It’s been useful,” Tung said, “just to be able to bring in an audience in an environment where people aren’t really familiar with your brand in the start.”
Evelyn Lin of Pace, though, remains convinced that Hong Kong offers enough to engage with China. It’s “really based on communication,” she said. “For example, because I am Taiwanese and speak Mandarin, I do have a really strong connection with most of the private museums in China.” After closing its Beijing gallery, Pace retained a small office there, allowing it to remain connected with artists and collectors and to continue to accept RMB in transactions. “If we can do a really good exhibition in Hong Kong,” Lin said, “I think people won’t mind flying in to see it.”
Topsy-Turvy Economic and Political Developments
The small slate of foreign dealers in China has been relatively stable of late, even as the country has faced persistent economic challenges, like capital flight. Last month, the Financial Times reported that Chinese corporate profits were set to show a third consecutive year of declines, and last October, the paper reported a 36 percent drop in the number of dollar billionaires over the past three years.
“Any time you have a 36 percent drop in anything, that’s never great news,” Tung said, “At the same time, I think it’s important to realize that China is exceedingly large. It has a wealth of talent that resides both in China and the diaspora… I think it still serves as a hub for a lot of the collectors, even though they now reside elsewhere.” Hilty agreed. There has been “maybe more movement between China and the West” recently, he said, and so Lisson has been “not just taking Western art into China but also bringing Chinese art to the West.” He added that “the presence of many Chinese collectors on the boards or acquisitions committees of Western museums has really helped that.”
How is everyone weathering the downturn? “Oh, we’re all suffering, but then things will move on, and we’ll all survive,” Huang said. “While the economy is not good, there’s always an area of the market that’s not doing as bad as everywhere else.” He named Taiwan as a bright spot.
“While the economy is good, we make money,” Huang said. “While the economy is not good, we take a step back and think about how to build the brand.”
When Pace exited Beijing in 2019, some saw it as a harbinger of East-West cultural decoupling. However, Tung said that, when Pace entered China, the landscape was completely different in the art industry. “I think that was really the height of the first Chinese contemporary art bubble with Sotheby’s in New York really raising prices a lot,” he said. “At that time, there was no institutional infrastructure in China as well. So, the galleries were playing an outsized role in having to develop the market, the audience, and the artists.” Pace “didn’t respond to the changes that happened over the 12 years that they were operating in mainland China,” he said, mentioning “changes in regulatory issues, tax law, customer and client tastes and needs.”
Trump’s return is also a reminder of how dramatically business with China can be affected by global politics. Just this morning he imposed a 10-percent tariff on Chinese imports to the U.S. Huang recalled that Trump imposed “a 25 percent punitive import tariff on all Chinese artworks” in his first term. “That being very scary and discouraging, at the end of the day, we still made things happen,” he said, “I think it is my mission to exchange programs, thoughts, ideas, and bridge cultures.”
To put it simply: China is challenging, but it is also too important to ignore. “There are ups and downs in the economy, which we’re all very aware of,” Hilty said, “but most of the people we work with are in for the long run. We have confidence in each other to continue.”
