The market for Chinese contemporary art is rolling out at a feverish pace, becoming the single fastest-growing segment of the international art market. Since 2004, charges for works by Chinese contemporary artists have increased by 2,000 percent or even more, with paintings that once sold for under $50,000 now bringing sums above $1 million. Nowhere has this boom been felt more appreciably than in China, where it has spawned massive gallery districts, 1,600 auction houses, and the initial generation of Chinese contemporary-art collectors.This craze for Chinese contemporary art in addition has given rise to a wave of criticism. There are charges that Chinese collectors are employing mainland auction houses to improve prices and engage in widespread speculation, in the same way should they were trading in stocks or property. Western collectors may also be being accused of speculation, by artists who say they buy works cheap and then sell them for ten times the original prices-and sometimes more.Those who entered the forex market in the past three years found Chinese contemporary art to be a surefire bet as prices doubled with each sale. Sotheby's first New York sale of Asian contemporary art, dominated by Chinese artists, brought a complete of $13 million in March 2006; exactly the same sale earlier this March garnered $23 million, and Sotheby's Hong Kong sale of Chinese contemporary art in April totaled nearly $34 million. Christie's Hong Kong has had sales of Asian contemporary art since 2004. Its 2005 sales total of $11 million was dwarfed by the $40.7 million total from the single evening sale in-may of this year.These figures, impressive as they are, do not begin to convey the astounding success at auction of a handful of Chinese artists: Zhang Xiaogang, Yue Minjun, Cai Guo-Qiang, Liu Xiaodong, and Liu Ye. The first choice this year was Zeng Fanzhi, whose Mask Series No. 6 (1996) sold for $9.6 million, a record for Chinese contemporary art, at Christie's Hong Kong in-may.Zhang Xiaogang, who paints large, morose faces reminiscent of family photographs taken through the Cultural Revolution, has seen his record rise from $76,000 in 2003, when his oil paintings first appeared at Christie's Hong Kong, to $2.3 million in November 2006, to $6.1 million in April of this year.Gunpowder drawings by Cai Guo-Qiang, who was recently given a retrospective at the Guggenheim Museum in NY, sold for well below $500,000 in 2006; a suite of 14 works brought $9.5 million last November.In line with the Art Price Index, Chinese artists took 35 of the most notable 100 charges for living contemporary artists at auction last year, rivaling Jeff Koons, Damien Hirst, and a bunch of Western artists."Everybody is seeking to the East and to China, and the art market isn't any different," says Kevin Ching, CEO of Sotheby's Asia. "Notwithstanding the subprime crisis in the U.S. or the fact that some of the other financial markets seem jittery, the entire business community still has great faith in China, bolstered by the Olympics and the planet Expo in Shanghai in 2010 2010."There are indications, however, that the international market for Chinese art is starting to slow. At Sotheby's Asian contemporary-art sale in March, 20 percent of the lots offered found no buyers, and even works by top record-setters such as Zhang Xiaogang barely made their low estimates. "The marketplace is getting mature, so we can't sell everything anymore," says Xiaoming Zhang, Chinese contemporary-art specialist at Sotheby's NY. "The collectors have grown to be really smart and only focus on certain artists, certain periods, certain material."Because of their part, Western galleries are eagerly pursuing Chinese artists, many of whom were unknown just a few years ago. Zeng Fanzhi, for instance, has been signed by Acquavella Galleries in New York, in a two-year deal that exceeds $20 million, according to a Beijing gallerist near to the negotiations; William Acquavella declined to comment. Zhang Xiaogang and Zhang Huan have joined PaceWildenstein, and Ai Weiwei and Liu Xiaodong showed with Mary Boone last spring. Nearly every major New York gallery has signed on a Chinese artist: Yan Pei Ming at David Zwirner, Xu Zhen at James Cohan, Huang Yong Ping at Gladstone, Yang Fudong at Marian Goodman, Liu Ye at Sperone Westwater. Their works are entering private and public collections that until now haven't shown any particular interest in Asian contemporary art."The marketplace hasn't behaved as I anticipated," says New York dealer Max Protetch, who has been representing artists from China since 1996. "Most of us anticipated that the Chinese artists would go through the same critical process that happens with art anywhere else on the planet. I assumed that some artists would fall by the wayside, which has not been true. Each of them have become elevated. It looks like an uncritical market."One of the key artists buoyed by this success is Zeng Fanzhi, who is most widely known for his "Mask" series. Five years ago his works sold at under $50,000. Today he commands prices on the primary market nearer to $1 million, with major collectors Charles Saatchi and Jose Mugrabi among his fans. Now finding your way through his first solo show at Acquavella in December, he is considered one of the most serious artists on the Beijing scene because he works alone, minus the horde of assistants found in most other artists' studios in China. Still, his lifestyle is typical of this of his equally successful peers. When asked if he owns a mammoth black Hummer parked outside his studio, he answers, "No, that's an ugly car. I've a G5 Benz."This success has blossomed beneath the watchful eye of the Chinese government. Movies, television, and news organizations are strictly censored, but overall, the visual arts aren't. Despite sporadic incidents of exhibitions being closed or customs officials seizing artworks, more often than not the government has supported the growth of a skill market and contains not interfered with private activity. In the 798 gallery district in Beijing, a Bauhaus-style former munitions complex that is transformed in to the capital's hottest art center, with an increase of than 150 galleries, one finds works addressing poverty along with other social problems, official corruption, and new sexual mores. The icons of the former China-happy workers and peasants and heroic soldiers raising the red banner-are treated with irony, if at all, by the artists whose works are on view in these galleries, which are private venues generally not under the strict control of the Ministry of Culture.On the eve of the Olympics, however, the government asked one gallery to postpone an exhibition until after the games. Considered unsuitable was "Touch," a show by Ma Baozhong at the Xin Beijing Gallery of 15 paintings depicting important moments in Chinese history, including one predicated on a photograph showing Mao Zedong with the Dalai Lama and the Panchen Lama in 1954.The Beijing municipality spent enormous funds to renovate the 798 district before the Olympics, putting in new cobblestone streets and lining its main thoroughfare with caf�s. Shanghai, which has benefited less from government support, now boasts at the very least 100 galleries. Local governments throughout the country are establishing SoHo-style gallery districts to improve tourism.One individual who seems confident concerning the future of the Chinese market is Arne Glimcher, founder and president of PaceWildenstein, who opened a branch of his gallery in Beijing in August. Situated in a 22,000-square-foot cement space with soaring ceilings, redesigned at a cost of $20 million by architect Richard Gluckman, the gallery is in the center of the 798 district. "We have been committed to the art, and we wished to open a gallery where our artists are," says Glimcher. Adding that he normally eschews the "McGallery" trend of establishing satellite spaces around the globe, Glimcher insists that it had been necessary to set up a branch in Beijing because there is "no local gallery of our caliber" with which Pace could partner. He has, however, recruited Leng Lin, founder of Beijing Commune, another gallery operating in 798, to be his director.Another Western dealer who has taken the China plunge is Arthur Solway, who recently opened a branch of James Cohan in Shanghai. "I started arriving at China five years ago, and I was fascinated by the power," says Solway, who wanted to introduce gallery artists like Bill Viola, Wim Wenders, and Roxy Paine to Asia but, like Glimcher, cannot find a public museum or private gallery he considered professionally qualified to handle such exhibitions. James Cohan Gallery Shanghai is situated on the floor floor of a 1936 Art Deco structure in the French Concession, a particularly picturesque section of the city. The building was once occupied by the military, and red Chinese characters on the front door still exhort, "Allow spirit of Mao Zedong flourish for 10,000 years.""From 1966 to 1976, during the Cultural Revolution, people had nothing, however now there are spas in Shanghai and people drinking cappuccinos and purchasing Rolex watches-it's an amazing phenomenon," says Solway, who believes it is just a matter of time before these same newly affluent consumers begin to collect contemporary art.Chinese collectors-or the hope that you will see Chinese collectors-are the main element draw luring these galleries to Beijing. As recently as two years ago, few could name a good single Chinese collector of contemporary art. It had been a truism that the Chinese preferred to spend their money acquiring antiquities and classical works. Since then several well-known mainland collectors have emerged on the scene.Most visible is Guan Yi, the suave, well-dressed heir to a chemical-engineering fortune, who has assembled a museum-quality assortment of more than 500 works. A major lender to the Huang Yong Ping retrospective organized by the Walker Art Center in Minneapolis in 2005, he regularly entertains museum trustees from everywhere, who make the pilgrimage to his warehouse on the outskirts of Beijing. Now he could be building their own museum.Another noted figure is Zhang Lan, head of the South Beauty chain of Szechuan-style restaurants throughout China; she also offers assembled an enviable collection and displays pieces from it in her chic establishments. The film actress Zhang Ziyi is representative of a fresh class of collectors from the entertainment industry, while Pan Shiyi and Zhang Xin, chairman and CEO of the mammoth SOHO China property empire, have commissioned projects for their upscale residential properties.Two collectors who are cheerleaders for the Beijing art scene are Yang Bin, an automobile-franchise mogul, and Zhang Rui, a telecommunications executive who is also the backer of Beijing Art Now Gallery, which took part in Art Basel in June, among the first Beijing galleries to seem at the fair. Both of these do a lot more than collect art. They will have hosted dinners for potential collectors, organized tours to Art Basel Miami Beach, and brought friends with them to sales in London and NY. Zhang Rui, who owns a lot more than 500 works, has lent art to international exhibitions, most notably the installation Tomorrow, which features four "dead Beatles" mannequins floating facedown, created by artists Sun Yuan and Peng Yu for the 2006 Liverpool Biennial, which rejected it.Zhang is now building an art hotel, featuring specially commissioned works and artist-designed rooms, outside the Workers' Stadium in the heart of Beijing. "I am trying to think of ways of changing my private collection into a public collection," Zhang explained to ARTnews by way of a translator. It isn't financially advantageous to do that in China, as no tax benefits accrue from donations to museums or other nonprofit institutions.Zhang Rui represents the handful of Chinese collectors that are public about their activities and are building noteworthy collections. Far more typical of buying activity in China is the rampant speculation taking place in the mainland auction houses. There are 1,600 registered auctioneers, and their sales attract a huge selection of bidders. Chinese buyers are more more comfortable with auction houses, which were running a business since 1994, than with galleries, which weren't licensed to operate by the government before late 1990s.These auction houses run by their very own rules, generating what sometimes seems like a "wild, wild East" atmosphere. It is, for instance, fairly common for a house to get consignments directly from artists, who then utilize the sales to establish charges for their works on the primary market. More often, given that China has a huge selection of galleries, dealers come to a sale with buyers in tow, publicly bidding up works to determine "record prices" and advertise their artists. This type of bidding ring would be considered illegal in the usa, but in China it really is viewed as a savvy business practice. There's little regulation of auction houses and few developed legal norms in the field, in order that even though buyers have grievances-with fakes and forgeries, for example-they usually do not feel they can resort to regulations. Bidding is a social in addition to a business activity, and buyers are pleased to flaunt their status by paying record prices or quickly flipping artworks, not merely for profit but so they can feature their short-term gains.As the domestic market for contemporary art matures, however, many of these practices are getting into question. "Two years ago it had been more necessary for me to bring my artists to auction," says Fang Fang, owner of Star Gallery in Beijing, which focuses on young emerging artists such as for example Chen Ke and Gao Yu. "Given that the gallery market has increased, I find it is better to help keep my artists out of the auction rooms, and there's much less reason to market there."Two mainland firms, Beijing Poly International Auction Company, and China Guardian Auctions Company, dominate the field of contemporary Chinese art. Their combined 2007 total greater than $200 million in sales represented nearly two-thirds of all auction sales in this category in mainland China for the entire year. Last spring Guardian achieved $142 million in sales of classical artworks, furniture, ceramics, silver, and coins, and $40 million in sales of contemporary material. The latter figure included the $8.2 million fetched by Liu Xiaodong's Hotbed No. 1, a record for a painting in love with the mainland. In a similar selection of sales last spring, Poly sold $130 million worth of works, including $27 million in a single evening contemporary-art sale. (These figures represent a slight decline for the year because both houses held benefit sales for Szechuan earthquake victims, raising a lot more than $20 million to aid relief efforts.)Poly and Guardian reflect two vastly different perspectives on the domestic market in Chinese contemporary art. Guardian is the oldest and most respected auction house in China, founded in 1993 by Wang Yannan, daughter of Zhao Ziyang, the former Communist Party leader who was placed directly under house arrest after opposing the government's use of force against demonstrators at Tiananmen Square in 1989. If Poly is well known because of its vast resources and willingness to create deals to nab consignments, Guardian is known because of its respected specialists and long-term client relationships. For instance, when the Museum of Fine Arts, Boston, decided to sell 20 pieces of Qing dynasty porcelain in mainland China, it consigned the collection to Guardian.The atmosphere of a sale at Poly or Guardian is surprisingly similar to that in the salerooms of Christie's or Sotheby's. The catalogues are identical in design, and the bidding proceeds within an orderly, even sedate, fashion, despite the crowds of spectators in the room."From our beginning, we studied what the principles of an auction house should be, and we adhere to these principles," says Guardian president Wang. She also serves on the board of the new nationwide auctioneers' association, which hopes to enforce regulations on the auction market.Poly is an enterprise within the China Poly Group Corporation, a $30 billion conglomerate this is the privatized branch of the People's Liberation Army. Established initially to repatriate artworks and antiquities, Poly has spent $100 million buying objects like the bronze animal heads from the water-clock fountain which were looted from Beijing's Summer Palace by British and French troops in 1860; the pieces later resulted in in the West. The repatriated objects are showcased in the Poly Art Museum in the sparkling New Beijing Poly Plaza, a glass-enclosed tower designed by Skidmore, Owings & Merrill.The more freewheeling Poly is well known for practices such as adding for auction works from its own collection or having consignors guarantee that they will bring buyers to the sale to meet low estimates. Still, even here you can find signs that the market is maturing and contains become too expensive for casual speculators. "These collectors you are talking about are in fact quite small collectors," explains Zhao Xu, senior consultant at Poly. "They bought for several years at very reasonable prices, but now that prices are skyrocketing, the only way they can afford to get would be to sell. The collectors that I understand already come from a high social status, and they can afford to buy pieces worth $1 million or $2 million and are looking for the very best works, the masterpieces, to increase their collections."When asked if Poly follows the guidelines of the Western auction houses, Zhao sharply retorts, "Sometimes even Sotheby's doesn't follow the rules." Or as Gong Jisui, an art-market specialist who's a professor at the Central Academy of Fine Arts in Beijing, says, "The Chinese learned this game of speculation from the Westerners who played it first."The incident to which both men are referring may be the sale of the Estella Collection at Sotheby's Hong Kong on April 9 of this year. The function reaped $18 million for 108 works. (Yet another 80 works will undoubtedly be up for sale this month at Sotheby's New York.) The collection was put together from 2003 to 2006 by NY dealer Michael Goedhuis for several investors that included Sacha Lainovic, a director of Weight Watchers International, and Raymond Debbane, CEO of the Invus Group, an exclusive equity firm.Last year the assortment of approximately 200 works was sold to William Acquavella, who consigned it to Sotheby's. Auction house officials won't discuss financial details, but Sotheby's had a stake in the collection. Following the sale it was widely reported that many of the artists were angered by the auction because, they said, they had sold their works to Goedhuis at discount prices in exchange for promises that the collection would remain together for public display."The idea was to help keep the collection intact also to view it safely into some institution," says Goedhuis, who denies that any promises were made. "The perfect situation was to see it having an institution in China, because there is no such collection." The collection was published in a book, China Onward, having an essay by leading China expert Britta Erickson, and it was exhibited at the Louisiana Museum of Modern Art in Denmark and the Israel Museum in Jerusalem shortly prior to the sale. According to Goedhuis, due to rapid rise in prices, the investors chose to sell the collection with hopes that it would not be broken up."Because the museums in China aren't mature enough nor are they rich enough to accomplish an acquisition such as this, my hope was that Steve Wynn would achieve this for his sophisticated casino complex in Macao," Goedhuis says. He turned to Acquavella because, he says, he believed the dealer would bring the collection to Wynn; Acquavella paid a reported $25 million. Acquavella director Michael Findlay laughs at the suggestion that there is any indication that the collection would head to Wynn. "I think this whole thing is surrounded by so much rumor and speculation," he says. "We bought a group of paintings, and we sold several paintings, and that's the complete story."In accordance with Maarten ten Holder, Sotheby's managing director for North and South America, the firm received inquiries prior to the sale from several artists in the collection, wondering why the works were to be auctioned. There's disagreement about whether Goedhuis made firm promises to help keep the collection together or merely made a sales page to artists that inclusion in the collection would improve their reputations. Yue Minjun, who had two works in the sale, says no promises were made. And Goedhuis bought Zeng Fanzhi's Chairman Mao with Us from Hanart T Z Gallery in 2005 for the asking price, $30,000, no discount given. It sold for $1.18 million."You have to understand that there was no market because of this work when I was buying," says Howard Farber, whose collection brought $20 million at Phillips de Pury & Company in London last October. Farber assembled 100 choice functions by assiduously visiting artists' studios in Beijing in the late 1980s, accompanied by the Beijing-based critic Karen Smith, a respected author and curator in this field. A work for which he paid $25,000 in 1996, Wang Guangyi's Great Criticism: Coca-Cola, was sold at Phillips de Pury for $1.6 million. The customer was Farber's son-in-law, Larry Warsh, who bid on several works at the sale, in accordance with newspaper accounts. "I really didn't actually know I was going to buy the Wang Guangyi until that moment," says Warsh. "Howard has his collection, and it's not my collection, and there were many pieces I wanted from that collection that I'd have wished to buy but couldn't afford."Many Beijing artists had agreements with Warsh to create work for his collection and his art advisory business, which began in 2004, inspired by Farber's example in the field. "I was enamored by China, and I was enamored by the art of China when i learned about important artists," says Warsh. "But what really hit me first was how the pricing did not make sense if you ask me at all-everything was out of whack."Warsh, who amassed an accumulation of works by Jean-Michel Basquiat, Keith Haring, and Kenny Scharf in the late 1980s, was the publisher of the now-defunct Museums Magazine, which he sold to LTB Media in 2004. He stated at one point that his collection totaled more than 1,200 works; now, he says, he owns approximately 400 paintings and photographs. Section of his collection is managed by his new business venture, AW Asia, that includes a gallery in Chelsea and intends to assemble collections of Chinese contemporary art for museums and major private collectors. The Museum of Modern Art in NY recently acquired 23 photographs from AW Asia.With Farber and Warsh circulating in Beijing for a variety of purposes, it was easy for Chinese artists to become confused about who was buying for whom and for what purpose. In recent interviews, several artists-most notably Zhang Xiaogang, who had an agreement with Warsh-pointed to him for example of a speculator.Warsh replies, "Although some artists are not so pleased with their decision to possess sold levels of artwork at that which was then their current values not so long ago, there are several artists who are not resentful and actually pleased that someone has taken an interest within their work."New York dealer Jack Tilton, who spent some time working with Chinese artists since 1999, says, "All these artists are hoping that their work finds good homes rather than getting churned in the commercial market. But they have also played a component in this market, embracing capitalism more than we have, in funny ways. They are not naive about some of this stuff."When asked concerning the artists' reactions to the sale of his collection, Farber was flabbergasted: "Just what exactly? Now I'm the bad guy. That pisses me off!"Numerous major collectors of Chinese contemporary art who've been in the field for some time are holding on with their collections. Uli Sigg, Swiss ambassador to China, Mongolia, and North Korea from 1995 to 1998, has generated an accumulation of key works he has toured in the exhibition "Mahjong" to museums throughout Europe and, lately, the University of California's Berkeley Art Museum (September 10-January 4). Belgian collectors Guy and Myriam Ullens have used their resources to establish the initial nonprofit contemporary-art center in Beijing, where they're currently exhibiting their historic collection. Up to now, collector Charles Saatchi has been hanging to his purchases in preparation for opening his new gallery in London on the 9th of the following month with a show of Chinese contemporary art; he has also launched a Chinese-language Internet site which mainland artists can post their works.In comparison to Western buying, mainland Chinese participation pales. Though there are many rumors concerning the power of the new Chinese buyers, their presence has not been felt in the major auction houses, where most of the records are being set. "Hong Kong at this time covers the global buyers, especially those from across Asia," says Eric Chang, Christie's international director of Asian contemporary art. "I'm not necessarily seeing mainland Chinese buyers-less than 10 percent-a drop from around 12 percent." Dealers in China also have seen few mainland collectors amongst their regular clients. "I don't know yet about collectors," says New York dealer Christophe Mao of Chambers Fine Art, which recently opened a branch in Beijing.Regardless of the current shortage of mainland art collectors, China is emerging as a significant art center, having turn into a hub for buyers from South Korea, Taiwan, Singapore, Indonesia, and Southeast Asia, and for overseas Chinese from all over the world. Reflecting this diversity is the wide variety of foreign dealers on the list of 300 galleries in Beijing, including Continua from Italy, Urs Meile from Switzerland, Arario and PKM from South Korea, Beijing Tokyo Art Projects from Japan, and Tang from Indonesia."In Beijing it's getting increasingly difficult to share with you the Chinese market as a separate entity from the broader Asian art market or the international art market," says Meg Maggio, an American who came to China in 1988 and ran among the first galleries in the country, CourtYard, in Beijing, from 1998 to 2006. Now she's her very own gallery, P�kin Fine Arts, where she represents a global stable of artists. "How do you describe the marketplace for a Korean artist showing in China or perhaps a Chinese artist surviving in NY?" she asks, noting that her business will come from South Korean collectors visiting Beijing or European companies doing business in China.One factor in China's development as a center for contemporary art may be the proliferation of art fairs. Beijing has two, the China International Gallery Exposition and Art Beijing; Shanghai gets the newly created ShContemporary, now in its second year; and Hong Kong just launched ART HK. CIGE director Wang Yihan says her fair attracted 40,000 visitors this year, while the more high-toned ShContemporary brought in 25,000 and ART HK 08 had 19,000. These numbers may seem small in comparison with the 60,000 who crowd Art Basel, but dealers believe that the fairs in Asia are worthwhile since they attract new buyers and make Asian collectors feel convenient about acquiring art from galleries."Anywhere else, a fair is a fair," says Lorenz Helbling of ShanghART, one of the oldest galleries in China and a participant in Art Basel. "However in Shanghai a fair feels as though so much more because only there can it make an impact on several million people." He is referring not merely to attendance but to the intensive publicity and official recognition directed at ShContemporary in its inaugural year.Just a few years back it would have already been impossible to try to sell contemporary art to Asian buyers, let alone mainland Chinese collectors, in the public forum of an art fair. Now, with the astounding success of Chinese contemporary art, collectors from over the region-and more than a few from the United States and Europe-are targeting China as a destination. In accordance with Nick Simunovic, who has opened an office and showroom for Gagosian Gallery in Hong Kong, it really is just a matter of time before these regional buyers turn their attention to Western contemporary art."My sense is that wherever you have tremendous wealth creation, the collecting cycle undergoes three phases," he says. "First, people collect their cultural patrimony, and then they collect their very own contemporary art. I believe the ultimate stage is if they gain a far more globalized contemporary-art approach."Gagosian first considered opening an office in Shanghai but encountered obstacles to conducting business on the mainland. The most formidable of these is a 34 percent luxury tax on art, which foreign galleries that participated in ShContemporary found difficult in order to avoid.  read more , by comparison, is really a duty-free zone. And Simunovic discovered that even Jeff Koons was a hardcore sell in Shanghai, whereas Hong Kong offers more possibilities for Western contemporary art. Just a year ago Hong Kong billionaire Joseph Lau paid $72 million for Andy Warhol's Green MOTOR VEHICLE ACCIDENT (Green Burning Car I). In May Christie's brought a Warhol portrait of Mao, valued at $120 million and for sale privately, for viewing in Hong Kong. (At press time it had not yet been sold.)"Sure, China is hot, but that's just the peak of the iceberg," says Lorenzo Rudolf, former director of Art Basel and cofounder of ShContemporary. "This is not just about a group of Chinese painters. It's in regards to a growing market going on in this continent."With the sheer abundance of galleries, auction houses, and art fairs in China, the bigger art world is recognizing the power of the Asian market. Standing within an auction house in NY or London watching paintings by Chinese artists sell for millions, you can grouse relating to this boom and hint that it will turn out to be a bubble. But strolling in a bustling gallery district in Beijing, with students and tourists crowding the caf�s and boutiques and filling the huge art showrooms, few would predict a downturn in the near future.