Sotheby’s New Major Shareholder Is Already a Power in Chinese Art

Despite his high-culture aspirations, Mr. Chen, 58, is minor Communist nobility. His father was a People's Liberation Army soldier, and his wife, Kong Dongmei, is a granddaughter of Mao Zedong. He has described auctioneering as a patriotic cause to protect China's heritage, but he also supports contemporary art. He has been an advocate of market forces, but established himself in businesses — art sales and insurance — that required keeping wary regulators on his side.

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A preview of a China Guardian auction in Beijing. Credit Adam Dean for The New York Times

Meg Maggio, the director of Pékin Fine Arts, which has galleries in Beijing and Hong Kong, said it would be foolish to dismiss Mr. Chen and his team as new arrivals with cash but no expertise.

"Chen is an ambitious powerhouse," Ms. Maggio said. "These are far from neophytes. These are sophisticated, savvy art world veterans."

Sotheby's has its own operations in China, including offices in Beijing and Shanghai, and an additional office in Hong Kong, where it competes with Guardian and other auction houses.

Art investors and gallery owners in China said they would be watching to see how far Taikang's stake in Sotheby's would translate into cooperation between the two companies, and perhaps Guardian Auctions as well.

"This might give Sotheby's an important ally in China," Ms. Maggio said. "Guardian also needs a strong overseas presence."

Taikang has said it has ideas for possible members of Sotheby's board, and if Mr. Chen is nominated, he will not need tutorials about how the company works. When he quit as an editor for a government-run magazine and plunged into auctioneering in the early 1990s, he copied Sotheby's, right down to the fine points. He borrowed a video camera, visited a Sotheby's auction in Hong Kong and furtively recorded the proceedings.

"I was scared that they'd say something, and videoed on the sly, my legs and hands shaking," he wrote in his memoir, published in 2014. Back in Beijing, he and his colleagues studied the video in all its details, down to the design of its bidding paddles.

In the decades that followed, Guardian prospered as China's newly wealthy created a booming market for fine art.

Now Sotheby's and Guardian have strong reasons to turn to each other. The Chinese economy has slowed, as have art sales. Sales of contemporary Chinese works, for example, fell in value by 41 percent in 2015 compared with the year before, according to a report from Deloitte.

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An auctioneer at a China Guardian sale in Beijing. Guardian is the biggest shareholder in Taikang Life Insurance, which now holds 13.5 percent of Sotheby's stock. Credit Adam Dean for The New York Times

In the race to adapt, Guardian has been outmaneuvered by Poly Auction, a state-backed firm that has surged ahead of rivals while also generating disquiet in the industry about its opacity. Poly reported its sales in 2015 rose by 19.1 percent compared with 2014, while China Guardian recorded a 5.6 percent decrease, according to the Deloitte report.

Sotheby's, for its part, has been outpaced in China by Christie's and needs a stronger bridge to reach potential customers there, said Mr. Galbraith, the art market consultant. In 2013, Christie's beat out Sotheby's to become the first international auction house granted a license to operate independently in China.

"Sotheby's lost th e battle to enter the Chinese market, objectively quite badly. But this may help them win the war," he said. "Whereas China Guardian has fallen behind Poly in their international presence, and this deal changes that dynamic overnight."

Above all, auction houses in China must adjust to the changing tastes of wealthy art buyers, who increasingly look abroad to fill their collections. Buyers here appear to be following a pattern already seen in Japan and other countries, where they initially concentrate on domestic art and then expand their focus, Mr. Galbraith said.

In November, Liu Yiqian, a former taxi driver turned billionaire art collector, bought a painting of a nude woman by Amedeo Modigliani for $170.4 million at a Christie's auction in New York. Art Basel, a major fair for contemporary art, has sought to draw in more Chinese buyers through an annual fair in Hong Kong.

"There are changing tastes, which is coming from international travel, education and working experiences," said Jinqing Caroline Cai, the president of Christie's in China.

"Growing interest in international art has been a very, very strong trend," she said. "The reputation and brand value is very strong for Chinese to come into Christie's or Sotheby's."

Taikang is not the only investor angling to win more value from Sotheby's. Shanda Payment Holdings, a company in Singapore, received approval in May to raise its stake, Bloomberg reported. Third Point, a hedge fund that has been Sotheby's biggest shareholder, fought two years ago to shake up management of the auction company.

But Mr. Chen has cast himself as a serious patron with a long-term view. Taikang Life Insurance runs its own airy contemporary gallery in a part of northeast Beijing dense with galleries. Guardian Auctions has commissioned the firm of Ole Scheeren, an avant-garde German architect, to build an art center within walking distance of the Forbidden City.

"Entrepreneurs are the guardian spirits of great art," Mr. Chen said last year. "Without commerce, there is no art, because if art has no value, then nobody will go to enjoy it."

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