Does anyone remember a couple of months ago that the USA military found that the Chinese military has been trying to hack all systems in the USA?

Well wait tip you read this!

THE STATE RUN, BY THE CHINESE MILITARY, in its short life, Poly Auction has risen to become the third-largest auction house in the world, behind Christie’s and Sotheby’s. Its 2012 reported sales totaled nearly $1 billion, and its auction rooms now buzz with the energy of thousands of new consumers eager to buy a piece of their cultural history or invest in the recent art boom.


But while the art market in China remains robust — its $14 billion in sales last year make it the second-largest in the world after the United States — it is also rife with fraud, forgeries and payment defaults that, experts say, are undermining consumer confidence. 


Fearing that buyers will flee the market, government ministries and the China Association of Auctioneers, are pushing corrective initiatives, including asking auction houses to report sales that fall through and training experts to better identify forgeries. At first glance, Poly Auction, as a state-backed business that accounts for 11 percent of the country’s auction revenues, would appear to be an ideal place to start. But it is becoming clear that the powerful company, rather than serving as an instrument of reform, may pose a formidable challenge to it.

Beyond its 55 percent government ownership, Poly Auction is part of a company with a proud military heritage, expansive business interests and strong ties to China’s highest echelons, all sources of influence that critics say help shield it from encroaching regulations.

An industry study found that last year Poly had one of the worst records of buyers who did not pay, a persistent problem in the Chinese art market. When auction houses do not always note these failed transactions, as was the case with Poly, their reported sales figures exceed reality. The study found that Poly’s revenue was one of the most exaggerated among the top houses. And unlike major rivals, Poly has balked in recent years at allowing the auction trade association to publish full details of its sales.


Though Poly Group’s official ties to the military were cut in 1999, it is still staffed by former military officers and led by the relatives of senior Party officials. It still refers to its socialist mission, retains a stylized P from the People’s Liberation Army as its logo and remains involved in arms trading. (In February, the United States imposed sanctions on Poly Technologies, the defense equipment division, accusing it of violating a nonproliferation policy that controls weapons traffic with Iran, Syria and North Korea.)

In the 1980s, the Poly Group began to reinvest its arms profits in other sectors of the economy, including hotels and office towers. As the Chinese grew wealthier, the corporation branched out into culture and opened theaters and performance halls.


The Poly Group is overseen by the State-owned Assets Supervision and Administration Commission, which monitors 113 of China’s biggest state-run companies. But even experts who specialize in the workings of these companies don’t know just how Poly functions as a corporation, how power is shared internally, to whom its executives are really accountable or how its revenues and benefits are distributed.


Unlike Guardian and other houses, Poly refused for the past two years to allow the auction association to publish data on the individual works whose sales had not been paid for completely. On top of that, the auction association’s studies ultimately found that Poly is increasingly struggling with a nonpayment problem. In 2012, for example, the association found that, because of nonpayments, only 34 percent of the sales Poly reported for works valued at more than $1.6 million each were actually completed by May of the following year.


For now, though, both Christie’s and Sotheby’s remain on a tight leash, permitted to auction only watches, wine, jewelry and contemporary Chinese art, not the more lucrative relics and traditional Chinese painting and calligraphy.


“They don’t want to be one of the great auction houses of China but one of the great auction houses of the world,” said Laura B. Whitman, a specialist in Chinese art formerly with Sotheby’s and Christie’s.

Asked in an interview whether the foreign competitors concern him, Mr. Zhao shrugged. To do business in China, with its unique customs and cultural tics, is not as easy as simply setting up shop, he indicated.

“They are not qualified,” he said of Christie’s and Sotheby’s, “to be our rivals for now.”

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