Auctions in the People's Republic of China: Practice, Problems, Lessons, and Law Reform

Abstract

With a growing middle-class in mainland China who are looking for more ways to spend their wealth and diversify their investment portfolios, there has been, and continues to be, an increase in the number of ‘luxury’ purchases, including rare works of art and antiques, very often at auction. Indeed, China is now the world’s largest art market. However, the sale of art and antiques in China is often riddled with fraud and, in particular, sales at auction seem to be plagued with problems, not least due to the relatively new Law of Auctions (The Auction Law of the People’s Republic of China) which only became effective in January 1997. This paper aims to highlight these various problems (many of which appear to have become social norms), including counterfeit works of art, fraudulent valuations and the frequent failure of buyers to pay, as well as the various criminal practices at the auction itself, including ‘mock auctions’ and ‘auction rings’, and make recommendations for the reform of the Chinese law and practice of auctions. To this end, it will be demonstrated that there is much room for development so as to provide a respected, clear and comprehensive body of law which is accessible to the public at large (both within and outside China) and which, in turn, boosts confidence in those who seek to participate at auctions in mainland China, that is both domestic and international participants. In particular, the current laws and practices at the two most prominent international auction venues, that is London and New York, will be evaluated to consider how China may draw on their successes and learn from their failures, with a view to forming a workable and efficient legal framework of ‘best practice’ to form a basis for stimulating legislative discourse in China in the hope of strengthening China’s Auction Law through reform for the benefit of bidders, buyers, sellers and auctioneers alike.