Chinese and international auction houses are encroaching on each other's territory in Hong Kong and Beijing for the first time as they step up the battle for the Asian art market.

China Guardian Auctions Co., the country's second biggest auction house, held a small sale of Chinese ink paintings, calligraphy and furniture last weekend in Hong Kong, its first outside mainland China. The firm, founded less than two decades ago, went head-to-head with 268-year-old global giant Sotheby's fall sales in the former British colony.

China's other big player, Beijing Poly International Auction Co., also plans its first sale in Hong Kong next month. The two firms are little known outside of China, but their forays into Hong Kong, now a semiautonomous Chinese territory, are aimed at changing that.

Sotheby's, meanwhile, has big plans to expand into mainland China after setting up a joint venture allowing it to be the first foreign company to hold art auctions there, in a big leap over rival Christie's.

The expansion plans highlight how the thriving demand for art from Asia's growing class of wealthy collectors is leading to intensifying competition in Hong Kong, the region's auction hub. Many of the collectors flocking to the city for twice-yearly sales by a number of companies are mainland Chinese, but a growing number come from other Asian countries such as Indonesia.

Guardian and Poly have "been watching and seeing what Sotheby's and Christies have been doing (in Hong Kong), and I personally think they've been sat back in the wings saying 'The time is right'," said Jonathan Macey, senior broker with the Art Futures Group.

"You've got a sea of money coming into this business from across Southeast Asia" in addition to Hong Kong and Chinese collectors, he said.

Hong Kong is "a logical place for us to step out and to fulfill our international expansion plan," said Guardian's president, Yannan Wang, who founded the company in 1993 with Chen Dongsheng.

The southern Chinese city is also an attractive place for art auctions because there are no taxes, unlike in mainland China where buyers have to pay up to 23 percent in taxes and import duties.

Wang said expanding in Hong Kong was also symbolically important because the buyer of the company's first-ever lot at an auction 19 years ago was a Hong Kong collector.

Guardian's Hong Kong auction, held Sunday in a ballroom in the Mandarin Oriental hotel, raised $58.6 million, more than double the pre-sale estimate. It drew people such as Wu Jia-lin, who lives in the manufacturing hub of Dongguan in China's southern Guangdong province and has been collecting art for 10 years.

"There are fewer artworks here but they're good quality," said Wu, who had his eye on a Wu Guanzhong scroll painting of a bamboo grove with a presale estimate of $52,000-$77,400.

The sale room was jammed with hundreds of bidders, including more than 100 that the company brought in from Beijing. At times, the chatter from the crowd standing at the back of the room drowned out the auctioneer, who spoke only Mandarin.

But the din died down when the highlight of the daylong sale, a landscape series by Qi Bashi, went on the block. Bidding opened at 10 million Hong Kong dollars ($1.3 million) and rose rapidly until the hammer went down at HK$40 million ($5.2 million), which didn't include a 15 percent commission.

In a bold move, the event was held the same day as Sotheby's auction of contemporary Asian art, traditionally the most prestigious of the company's multi-day semi-annual sales.

A similar rivalry is in store in late November, when Beijing Poly International Auction Co.'s first Hong Kong auction coincides with Christie's fall sale.

The Chinese auction houses both have storied backgrounds.

Guardian founder Wang's father, Zhao Ziyang, was chief of China's Communist Party until he was purged for refusing to suppress the student-led pro-democracy demonstrations in Tiananmen Square in 1989 that ended in bloodshed. Co-founder Chen also set up Taikang Life Insurance Co.

Beijing Poly International Auction Co. was founded in 2005 by the China Poly Group Corporation, a giant state owned corporation that's best known for being a major defense contractor and which was owned by the People's Liberation Army until 1999. Beijing Poly has a reputation for being aggressive, with a reputation for setting high estimates to attract more business, art market insiders say.

The expansions by Guardian and Poly come amid signs of cooling. China is estimated to be the world's biggest fine art market, accounting for 30 to 41 percent of global sales, according to various estimates. But research firm ArtTactic says the market is slowing, with results showing Sotheby's, Christies, Guardian and Poly raising $1.5 billion in their spring sales, down 32 percent from the autumn 2011 auctions.

Sales volumes are "significantly down," said Michael Frahm, who runs a London-based art advisory firm and specializes in new Asian art. "I think the overall market is cooling a little bit, and it's definitely down from last year."

Chinese collectors' enthusiasm may also be damped after an investigation earlier this year by mainland authorities into tax evasion on artworks.

Sotheby's Asia CEO Kevin Ching shrugged off fears of a China slowdown, saying it was just "bumps in the road." He said the company's joint venture, Sotheby's (Beijing) Auction Co., is planning its first proper auction in China next spring, probably of wine, watches, jewelry and Western art.

Sotheby's invested $1.2 million for an 80 percent stake in the venture, which held a symbolic first sale last month of a single sculpture. Ching said Sotheby's spent six months in a "laborious and protracted process" trying to set up the venture.

"Different licenses, different authorities, different government levels would be approving 10,000 things that would be needed for the company to be operational," he said.

He said he wasn't worried about Guardian and Poly expanding into Hong Kong, saying they were "healthy competition" rather than a threat. Sotheby's, which rang up $1 billion sales in Hong Kong last year, may even benefit from the Chinese collectors that the mainland rivals bring to Hong Kong.

"Once they've learned how to buy in Hong Kong, how to do online bidding and phone bids, these people will come over to us very soon."


Online: http://english.cguardian.com/


Follow Kelvin Chan at twitter.com/chanman