The sale of a romantic portrait of Mao heralds the success of auctions in China.
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A PORTRAIT of Chairman Mao was sold for roughly pounds 500,000 at an auction in Peking last October. It did not make any headlines since the auctioneer was a mainland China firm that opened for business in March 1994 and is not yet in touch with the international press.

There has been an explosion of auction activity in China over the last two years. More than 100 new Chinese firms have sprung into being, modelled on the Hong Kong branches of Sotheby's and Christie's, but only four are serious concerns: three in Peking and one in Shanghai. As the firms gather confidence, more and more important works are being offered for sale.

The romantic portrait of Mao is one of the great icons of Communist China. Called Chairman Mao goes to Anyuan, it was painted in1967 by a Red Guard named Liu Chunhua, now director of the Peking Academy. The young Mao is depicted clutching a folded parasol, with an extensive landscape behind him.

In 1967 Mao was trying to oust President Liu Shaoqi, who was famous for organising a strike in the south-eastern city of Anyuan in 1923. Commissioning the painting was a propaganda bid by Mao aimed at suggesting that he himself had led the strike. He had visited Anyuan on seven occasions between 1921 and 1927, he claimed.

The picture was an instant success. On 1 July 1968, a large colour print of it was enclosed in three publications, People's Daily, Liberation Army's Daily and Red Flag Magazine, putting several million copies into circulation. The prints were often mounted and used as placards by demonstrators. The image was also turned into a stamp. It is thus one of the best known paintings in China; the purchaser has not been named.

The auction explosion in China is primarily an investment phenomenon. The recent economic boom has left successful private individuals and corporations awash with money but with very little to spend it on. Having noticed that Westerners often buy art as an investment, they are pouring their surplus money into it. It must be an odds-on bet that the Chinese market will overheat, as did the Western market in 1990.

Meanwhile, an intriguing process is taking place. During the Cultural Revolution, individuals were not allowed to own art and an enormous quantity was confiscated and confined to state warehouses all over the country. After Mao's death, restrictions were eased and state antique shops were set up, mainly servicing tourists. Foreigners, however, could not export anything produced before 1795; nor can they today. In the mid-1980s confiscated art was returned to its original owners - if they had some pull with the new regime.

A long-established gallery in Shanghai began to hold auctions about four years ago, but it has recently been eclipsed by Peking. China Guardian held its first sales in March 1994. The prime mover, and present chairman, is Chan Dong-sheng, a thirtysomething civil servant who used to work for the State Council, the Chinese equivalent of the Cabinet. His managing director is Wang Yannan, the daughter of a former premier. Their political connections help explain their success.

"We regard auctions as a service industry and don't have in-house expertise," Wang said. "We depend on experts from museums, the university and the Forbidden City. For each item we ask at least two expert opinions, sometimes three." China Guardian is backed by a consortium of state enterprises, an insurance company, two banks and the biggest local travel company.

In October 1994, a second company, Han Hai, entered the market. It is owned by the Peking state antique shops and has privileged access to material taken into antique shops for sale all over the country. A third Peking auction firm, Sungari, which started holding sales in October 1995, is a joint venture between the Chinese Interior Trade Ministry and Ting Lu, a Harvard business graduate who worked for the Rockefeller family in New York and now has a consulting firm in Peking representing 11 or 12 major Western corporations.

So far the auctions are devoted solely to Chinese art. Specialist catalogues are produced to cover old and new Chinese brush paintings, fan paintings, modern oil paintings, calligraphy, printed books, jewellery and "curios" - which include ceramics and works of art. In the West "curios" account for more than 90 per cent of the market in Chinese art, while in China paintings predominate. Excavated material, which bulks so large in the West, cannot be sold in Chinese auctions.

There are three different categories of goods: freely exportable items; works for which "export clearance will not be granted"; and works that can only be purchased for "museums, libraries and state-owned organisations in mainland China". The last category would seem to attract no competition since all the contenders would be state-owned, but independents are allowed to bid as long as they give the object to a museum in the end. Such purchases can, perhaps, be used as a means of gaining kudos with the government by companies hungry for contracts.

China Guardian managed to sell a blue and white moon flask of the Yongle period (1403-1424) for about pounds 504,000, two or three times its value on the Western market, while Han Hai sold a landscape painting of the Northern Sung dynasty (960-1127AD) to the Peking Palace Museum around pounds 1.6m, the highest auction price so far achieved in China. Rumours circulated in Hong Kong that the price had been fixed in advance and the Palace Museum actually paid about half this sum.

Other highlights of the autumn auctions included a hanging scroll landscape by Huang Binhong (1865-1955) at pounds 220,000, and an anthology of poems compiled in the 10th-century and block-printed in the 13th at pounds 120,000 (printing did not reach Europe until the mid-15th century).

With the hand-over of Hong Kong scheduled for 1997, the auction market has weakened there and Chinese art is not selling at all easily in the West. The Japanese, who used to be big buyers, have faded out since the market collapse in 1990. So the only boom market anywhere is currently mainland China.

For most of this century art has been leaving China for the West. Now it is beginning to go back. Bob Ellsworth, a New York dealer, sent a collection of Chinese calligraphy for sale in Sungari in October. "I got $100,000," he said, "a lot more than I would have got in New York." !