The growth and struggle of local auctioneering

Zhao Qiang, co-director of Jung Hau Dian Tsang International Auctioneer

What is the background of the company?

Our company was established in Macau in 2016, although we previously had most of our auctions held in Beijing.

What is the current auction industry like in Macau?

My opinion towards Macau is, first of all, it is an international city. Most of the famous auction houses reside in big international cities such as London and New York. Let’s say for Paris, the city produces a lot of art pieces, but comparitively, the number of buyers is not significant. When compared to Paris, Macau neither produces a lot of art pieces nor are there a lot of local buyers who are interested in art or antique collections. So in a sense, Macau does not have the prerequisites to become a trade centre for artwork, but prerequisites can be created by people.

Given the size differences in the auction market, why did you and your partners choose Macau to launch the business?

For one, with the Hong Kong-Zhuhai-Macau Bridge soon to open, a one-hour living circle will be created, so in a sense it is possible that there will be one [auction] market in both Macau and Hong Kong. It is feasible that Macau can borrow the resources from Hong Kong, given that Macau has limited antique shops or collectors compared to Hong Kong. But Macau has more venues than Hong Kong. In Hong Kong, venues used by Sotheby’s and Christie’s would be prohibited to be used by other companies.
For two, as I’ve mentioned, Macau is an international city. So with the effort in developing the art industry, there will also be the effect of magnifying the outcome. If we are to operate our business in one of the cities - in Beijing or Shanghai - we would end up as one of the many auctioneering houses, being insignificant because there are too many companies in China and some of them have been established for years.
In Macau, there are some 100 auction houses, none of which is well known by people, and the number of auctions held is not significant.
With the magnifying effect, it is very easy to become the first or the second within the industry.
Under this condition, Poly Auction entered the market in Macau. We entered the market earlier than Poly Auction, but we had not held any auctions in the city until last May. Poly Auction Macau had held two auctions and I think it is a good thing for them to establish a branch in Macau. Their participation will lead to more competition in the industry, which drives improvements in the industry.

How does your company differ from Poly Auction Macau in terms of positioning?

We are different from Poly Auction Macau in terms of the composition of the board of directors. For us, the majority of the members of the board of directors are recognised by their experience in antiques, and the average age of the members is above 50. Our first auction held generated higher revenue than the one held by Poly Auction: we generated MOP390 million compared to Poly’s MOP170 million.
In comparison to other auction houses in other places, we don’t do mock auctions because in Macau there is this special stamp duty which requires all attendants of auctions to pay the tax of 0.005 per cent.

What is the reason for the sucess of your first auction?

The reason is our choice of art pieces to be auctioned. Initially, our focus was on overseas markets like Taiwan, Japan and Singapore. We collect art pieces from these overseas markets since Chinese collectors perceive that pieces outside of China are seldom counterfeit and are rarely seen.
Most of our clients are Chinese collectors. Given that we have been extending our business on the Mainland, we have a more well established connection with Chinese collectors.
Chinese collectors love Chinese art pieces that come from outside the country. You can see that many of these collectors go to London or New York for art pieces.
It is impossible for us to establish a new connection in Macau without the connections we made in mainland China.
Secondly, there are relics that cannot be auctioned in China in accordance with Chinese laws, such as ancient porcelain or jade, which date back to the Tang Dynasty. Therefore, we auction the part that is not allowed in China. In fact, Macau has been positioned as the transfer station of these antique products and it has been recognised internationally.

How do you outsource art pieces and antique products?

One of our directors has residency in the United Kingdom so he has connections with collectors in the UK. Meanwhile, we also have employees who are connected with related companies in Germany and Switzerland. Moreover, our connections with markets in Hong Kong, Taiwan and Japan allow us to be well informed about the markets in the region.
Although collectors give notable pieces to auction houses like Sotheby’s or Christie’s, there are some less significant pieces that still deserve the attention of collectors in the Mainland. Plus, there are collectors who aim for less high-end products. Christie’s and Sotheby’s are long established corporations and they concern themselves a lot with the provenance of the items. But many of the pieces from China lack provenance, and as such, it is completely impossible for us to compete with the big auction houses to get those notable pieces.

What other types of auctions does the company conduct?

Aside from ancient porcelain and other objects, we also auction Chinese paintings and calligraphy, as well as contemporary art.
We had tried luxury goods such as jewellery, but the performance wasn’t satisfactory.
People here tend to attend jewellery auctions, but they don’t really aim to purchase. For Chinese buyers, they tend not to purchase a second-hand ring or handbag at auction houses. In terms of jewellery, people would rather buy new jewellery from retail shops, it’s cheaper and better for them, while people are still skeptical of buying second-hand handbags. Therefore, we are still exploring this part of the business.

What is your opinion of the city’s general cultural industries?

The cultural industries in Macau are still not well-developed, and I was thinking to do something for the city in developing this segment.
We have been talking to some of the local artists and we wish to promote their paintings. There is no promotion of local artists to the international stage. Although there are numerous exhibitions in the city showcasing local artists’ works, very few audiences are attracted and take notice.
We hope we can use our small exhibition hall to showcase and to promote local art.
We have planned to hold a charity auction of local paintings to promote local artists. We invited a painting expert from Taiwan to come and share experiences with local young artists.
In fact, we had auctions selling local paintings previously, and the results were not bad.

How do you go about cultivating local cultural interests?

We hold exhibitions prior to any auctions, and audiences can read and take free catalogues.
However, I am aware of the low participation, in particular by local residents, of the exhibition of Chinese intangible cultural heritage held previously. I believed that they were trying to promote intangible Chinese heritage in the city, but I think the city should constantly invite these experts to promote their skills, rather than to ask them to visit the city once in a while.
However, I’d seen quite a number of local residents, some of whom even brought along their children to have a look at our prior auction exhibition. I guess it was because of our promotion strategy, [including avenues such as] a cover advertisement in the Chinese newspaper Macao Daily.
I was surprised to find many collectors in Macau [who attended our auction], and these collectors came from different sectors. For instance, for our sale of this one Buddhist painting, there was this local who was willing to pay MOP10 million for the painting.
Meanwhile, there were objects sent to us to auction from the intangible cultural heritage because they weren’t able to sell them out. But we were able to sell them out with high prices. The reason is people tend to pay more attention to objects when they are being auctioned. That’s the attractiveness of auctioning.
We started cultivating the young people, and held short courses for university students for three days over three weeks. We included tours to introduce and explain art pieces and the applications were all full. We worked on this with other associations and a certificate was given to students who attended the course. In addition, we hired these students as volunteers for our auctions or exhibitions, and it is possible that we might employ these students after they graduate from university.
We offer higher salaries to our employees because we are competing with casinos in terms of hiring. Some of our employees are not familiar with the industry when they first enter, but we are willing to train and cultivate them. Therefore, it is very important to develop the industry. If there is positive development of an industry, young people will be attracted to take part in the industry and local talents can then be created.
One of our directors has proposed setting up a school to train talents in this particular area. In fact, we had talked to some local education institutions such as the University of Macau, and they welcome the thought of having more courses or training related to the cultural industries, such as implementing continued education programme courses.

What are the limitations of the industry in the city?

The biggest limitation of Macau is the lack of buyers. But the good thing is the MSAR government encourages the development of cultural and creative industries and art collection.
We haven’t received much concrete support from the government.
Legislator Si Ka Lon has been supporting the cultural and creative industry. As a member of the Cultural Industries Committee, since we have had limited information during the beginning of our business, Legislator Si has given us some help. In the sense of indirect help provided by the government, I would agree to consider legislator Si as a source of assistance made by the government.
The administrative procedures in Macau are very complicated. We need to report our auctions to the government and it usually takes one month to have all the procedures done. Therefore, there were many times that legislator Si helped us with the procedures.
The government requires us to provide a lot of documents, but the fact is there were times that the government asked us to provide further information one month prior to our auction. It always makes things too late, because it takes time for us to gather the documents they need.
In addition, there is a lack of legal support for this industry, and there is not a public department that deals with this industry.
Also, there are no insurance companies willing to cover highly valued products in Macau. Macau does not have the legal support for insurance. Therefore, we insure our objects in accordance with the Hong Kong regulations.
There might be some companies [out there] performing money laundering, but not us. But because of this, the government won’t allow us to apply for a POS (point-of-sale) machine, even if we asked for it just for three days. For example, we require our clients to deposit MOP1 million in order to protect our business, but without the POS machine are you expecting people to smuggle money from the Mainland? So in the beginning, we invited close clients and shareholders to guarantee, but we are now still struggling with this. We depend on the relations of other clients with other new clients and not collecting their deposits, but it is still very risky.
The government approves of the development [of art and antiques auctioning] but the policies available are not helping, therefore it is reasonable that many who get involved in the industry would rather choose the market in Hong Kong.

How do you ensure that the objects sold at auction are authentic?

It is a worldwide problem, because there is not one recognised institution which offers appraisal services. There are some groups or associations in mainland China, but all of them work for the public authorities. Therefore, it is entirely a matter of self-discipline. Christie’s hires specialists to ensure the authenticity of objects. For us, we have a number of shareholders who are very experienced in the field.
If there are doubts over the appraisals of some relics, we invite experts that we know who work in the nationally recognised institutions to have a look.

What are your future plans?

Our next auction will be held at the end of November at the Venetian, which will be at the same time as an auction held by Christie’s in Hong Kong. Usually, many of the collectors who attend the auction in Hong Kong would not mind coming to Macau and spending a day here. This time we will also provide accommodation for clients.