We have been working on this for publication in Beijing's Collector & Investor Magazine.  Work, here, at Leona Craig has been backed up, and it's almost complete [still a bit to add, but not much], so, we decided to put the most recent draft on the blog:

In an article, last year, we wrote about fakes in the Yixing teapot art market.  In this article, we turn our attention to another prevalent deceitful practice, in the teapot markets: overpricing.  A simple theorem of economics says that there is an optimal price at which to maximize profits.   That means that if you charge too high a price, you will actually make less profits than you could have because there is a demand side to every market, and people are more willing to buy at lower prices; less willing, at higher prices.  Knowing that, I see many businesses, in China, where the owner seems to believe that the higher the price he or she charges for their wares, the more money they will earn and the sooner they can retire, but many of them also go out of business within less than a year.

Art can be a tricky thing to price, but it is, usually, again, somehow, determined by supply and demand.  Indeed, there are auction markets, in much of art, to give a baseline for prices from a real transparent interactive market, albeit limited.  The first art that I came across and wanted to buy when I moved to China was Yixing zisha teapot art.  I saw two teapots, in shops, in Zengcheng, that I liked, so, I enquired about prices.  The first one was offered at Y2,000, which with my knowledge of art and art prices, seemed high.  I asked if the price could be lower, and the answer was no, so, I did not buy it.  The second one, I was told, was not for sale: I later bought it for Y1,000.  I eventually bought the former at a shop, in Guangzhou, for Y1,000.

Since those early days, I have gained much experience, in the teapot market: being able to spot fakes, knowing general prices, both from fair dealers and from artists, and understanding some of the games that go on, in the market.  The conclusion that I have drawn is that there are overpricing and price bubbles, in the teapot art market, and care must be taken not to be blown up with them when they eventually pop.

Several things contribute to the overpricing, in this market.  First, teapot art is promoted as one truly Chinese art.  That promotion is given a boost by the area of Yixing, the only place in the world where the so-called zisha rocks that make the clay that make Chinese teapots can be found, which does much to promote its art and artists.  In addition, unlike other art, such as paintings and sculpture, which are sold at galleries that require a fair amount of space for display, teapot art can be sold at any of the many small tea shops, which are ubiquitous, in China: it’s easy to find a few shelves on which to display a reasonable-sized inventory.   Finally, since most people have never visited the Yixing area and browsed its shops and studios, they have no real idea what prices should be: they only know the prices at their local tea shops or those that they might see at art fairs where overpricing is the rule, not the exception. 

In the teapot art market, teapots by famous artists of the past, like Jiang Rong, have been sold at auction for several hundred thousand Yuan; a teapot by Gu Jing Zhou recently sold at auction for over a million.  Thus, we have a high end for prices.  However, it seems that, as a result of those prices, some living artists, who are still cranking out copy after copy of their teapots, adding to the number of copies in the market, have, successfully, through their own marketing or that done by dealers or collectors, managed to get their teapot prices into the vicinity of a hundred thousand Yuan.  In turn, with that new upper bound for multiple-copy art by living artists (the number of teapots of dead artists is already fixed and can only get smaller through, for example, breakage), others have been trying to pull themselves to higher levels.  This coattail effect has worked its way down through teapot artists of lesser and lesser skill and renown, and the excessive  price structure has been reinforced by greedy teapot dealers. 

We can give some of our person experiences to exemplify the effects.  First, that teapot that I bought, in Zengcheng, five years prior was sold for Y3,000, just recently, to a customer in Xi’an.  In the intervening years, we found the artist and returned the teapot for a replacement, as a leg on the crab sculpture, on the side of the teapot, broke (which should not happen with a quality Yixing zisha teapot, in the first place).  As it turns out, she is part of a multigenerational teapot artist family, although only by marriage, not by blood.  We initially found her brother-in-law who said that that teapot was selling, at the time, for Y10,000: knowing teapot prices, we were not convinced that that should be the proper market price.  When we eventually found the artist, herself, she offered us copies for only Y1,000.  In fact, she did replace our broken teapot for free, but when we were not satisfied with the replacement she told us that we just did not understand teapot art.  We understand, all too well.  There is even more to the story, as it turns out.  By chance, the buyer of our teapot saw that same artist at a teapot art fair with another copy of her crabs on wicker teapot, just after he made the purchase from us, and he asked her the price.  Her response was Y10,000, an art fair price, if ever there was one.  Next, he told her that he had one, just like it.  Her response was that it was impossible, and she asked him what kind of box it came in.   After establishing that he did indeed have one of her crab teapots, she offered him another at Y2,500. 

We know of another artist, who makes limited edition teapots (although the limit seems to be growing, ever larger, with his greed), topped with small, highly-detailed sculptures of leopards, tigers, and chameleons, in multi-colored clay, for realism.  We can buy his teapots from a dealer for around Y10,000, so, we offered them in the Y10,000 plus area, on our website.  When he saw the prices on our website he telephoned and told us we could not put prices, like that, on our website because he had sold some to "important people” for as much as Y60,000. 

In another recent case, we met, but did not take on, yet another artist whose famous teacher gets in the neighborhood of Y60,000 for his teapots.  The student specializes in making detailed, multi-colored frogs for his teapots.  Frogs are common, and even detailed ones do not require a huge amount of work or skill, so, when he offered us his teapots, which are simply copied themes of other teapots, but with more special frogs, at Y3,000, we passed.  Indeed, we later met another young artist who specializes in detailed frogs at much more reasonable prices, and we added him to our gallery.

Another artist, whose work we sell in the range of Y2,000, recently, called and told us that other dealers were calling her and complaining because they were being embarrassed by customers who found our prices on the web after paying twice as much or more to them for the same thing: we are not greedy, but they, quite apparently, are.  When that artist asked us to take our prices off the website, we did, but we replaced those prices with a statement that our prices for her teapots are much lower than other dealers, and people can call us to see for themselves. 

One of our most extreme overpricing experiences was being offered a teapot by an artist who we did not know at a price of Y2,000 at a tea shop, in Xi’an; we later found his work at a teapot market, in Guangzhou, for closer to Y100.  In our wandering through teapot markets and shows, over the last several years, we have seen much unreasonable pricing, especially, since I am a foreigner.

Art markets, like any other markets, must be both self-consistent and in line, somehow, with other markets: supply, demand, returns, and risk for all things, whether it is precious metals, stocks, paintings, or sculpture, should, in the end, match up. The A good example for comparison with art is gold.  There is limited supply, just as there is in the art of specific artists and all artists. Supply for dead artists is fixed, and supply for living artists grows at a more or less slow pace.  Then, demand will be the basic driver of price.  If as another example we consider the Chinese stock market.  Several years ago, people were investing in stocks, and it became fad, and there was an excess of demand over supply.  Now, over the last year or so, supply has been greatly increased, and prices of stocks have come down. 

From the beginning, though, there is another basic problem with art markets, in China: even price records for art auctions are not completely reliable.  Time and again, we have seen auction records, reporting items as sold and with a price, for things that we know were at the same dealers’ galleries after the supposed sale at auction.  On the other hand, most of the auction business for Chinese paintings, sculpture and porcelain is actually outside the country: in London, the U.S., and Hong Kong where auction records are reliable.  So, at least we have a beginning basis for comparing teapot art against another more rational part of the art market.

Indeed, ceramic art is very common, in the West.  In fact, the first pieces of art that I bought when I was in college were ceramic pottery art, and I sold them, thirty years later, when I sold my art inn before moving to China.  Even famous modern Western artists, like Picasso and Miro, made ceramic art, so, there is a basic pricing structure for ceramics, in the markets, for a wide range of pottery art makers.  Moreover, I have been buying and selling paintings, sculpture and folk art, for several decades, so, I have experience with more general art pricing.  I have been dealing in Chinese art for about five years, including paintings, teapots, sculpture, and embroidered pictures, so, I have been developing a sense of art prices across areas of contemporary Chinese art forms, and teapots seem to be out of line with other areas of arts and crafts, both inside China and outside.

At our Leona Craig Art business, which sells contemporary oil and watercolor paintings, Xiangshou embroidered scenes, sculpture, and teapot art, it is important to us, as experts in markets, to properly price the art that we collect and offer for sale.  As dealers, in art, we mainly buy, in the dealer (wholesale) market, from other dealers and artists.  As dealers and traders in art, we expect to make a return, but, as professional investors, we also realize that greed is not a good business practice.  Even a maxim from Wall Street says: bulls make money, bears make money, and pigs end up broke or in jail.  In art, in fact, we, sometimes, sell at prices that are less than those at which artists sell their own works to retail customers, and we have, recently had a arguments with a number of teapot artists because we think that we have priced their art, fairly, although below the prices that they, themselves, try to get.  Our response has been that we will not raise our prices; we do not want to be complicit in overpricing, in any form. 

In looking at the art business, as a whole, we point out that, typically, paintings and sculpture are one-of-a-kind, which should have a bearing on price, demanding a premium to prices of art made in multiplicity.  We can buy a good painting, measuring 80 cm by 100 cm, from a well-regarded painter for around Y20,000, or we can buy an original one-of-a-kind cast-metal sculpture, measuring over 100 cm high, from an artist whose work is known, internationally, for Y40,000.  There are cases, in paintings and sculpture, in which more than one copy is made.  There are lithographs of some paintings, in which a certain specified number of copies are printed, and each is numbered as, for example, 4/50: the forth printed out of fifty total.  However, a lithograph sells for much less than an original one-of-a-kind painting.  By much less, we are talking, maybe, a thousand fold less.  There are also art prints of some paintings, and those sell for much, much less, again, than even a lithograph. Therefore, when it comes to buying a 400cc teapot that has been produced in a multiplicity of no particular limit, except for demand, for over, even, Y20,000, it just seems both unreasonable and out of line with the rest of the art market.  Although we can present no hard and fast rules for comparisons but only our judgment, our expertise, after all, is arbitrage, which is based on judgments about alignment-misalignment of different markets.

As it stands, our most expensive teapot art is in the vicinity of Y10,000, with only a few exceptions, and those are by people who I think are true artists, who make creative original designs, in small numbers of about one to five, that show true artistry in the details.  In fact, their art has even been collected by Western museums.  However, while we have chosen artists, whose prices seem not unreasonable for the art that they create, and while we have priced all of our art, relative to the other forms of art, in our collection, it is interesting to note that, although we have sold paintings, embroidery art, and sculpture to clients, in Europe and the U.S, we have not sold one teapot to a customer outside of Southeast Asia.  From that fact, too, we might infer that Westerners, knowing prices of a more general class of ceramic art, in other parts of the world, and across all levels of fame and ability, view, even, our teapot art prices as too high, relative to other art that they can purchase, although they also do not know a lot about the Yixing teapot art market, in particular.

In the end, we believe that inflated prices are all too common, in the teapot art market, and the buyer should beware.  As China becomes more integrated with the rest of the world, and when more Chinese discover art and decoration, in general, we believe that teapot prices will rationalize and be more in step with general international art prices, and some people will be faced with losses from the foolish prices that they paid for all too common Chinese art.

© Craig Mattoli, Red Hill Capital Corp., Delaware, USA
Leona Craig Art, Guangzhou, China: 86 136 3241 0877
Website: http://www.leonacraig.com 
11 Gui Gang Three Road, Dongshan Kou, Yuexiu district,
Guangzhou, China 510080
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