Approval for Shanghai to open the mainland’s first free-trade zone, widely considered a fresh threat to Hong Kong’s position as a leading financial centre, may also be a big threat to Hong Kong in its growing competition with Shanghai for Asia’s art auction business.
Christie’s became the first foreign firm to win approval to open a mainland-based subsidiary, in Shanghai in April, and it is expected to set up a new storage base in the city’s free-trade zone.
Shanghai government officials familiar with the situation said Christie’s, one of the world’s largest auction houses, would host its first mainland auction in September, after the launch of its Shanghai subsidiary. They said the firm had been in intensive discussions with the Shanghai government to establish a permanent storage facility in the city’s free-trade zone, where successful bidders at its auctions could keep the goods they bought, such as wines and paintings, without paying tax.
Christie’s already runs three storage sites around the world, in Singapore, in London, where it is headquartered, and in New York. Industry watchers say high land and operational costs in Hong Kong have discouraged Christie’s from establishing a permanent storage site in the city.
A government source said: “I think this will be certainly very good news to many local collectors and investors if auctions firms like Christie’s can have their own storage site in Shanghai. As long as you don’t bring those wines or paintings that you bid for back to your home [outside the free-trade zone], then you don’t need to pay any tax.
“For those professional art investors, all transactions can take place in the free-trade zone without any tax burden for both the buyer and seller.”
Shanghai’s free port will be a testing ground for major policy reforms to free up cross-border commodity and capital flows, areas in which it threatens to eclipse Hong Kong’s traditional contribution to the Chinese economy. The State Council said this week that the free-trade zone would be a snapshot of an “upgraded Chinese economy”.
A Christie’s spokeswoman in Hong Kong said the Shanghai free-trade zone was “a tangible example of the continuing drive for openness and to be outward facing from the Shanghai government”.
“Shanghai’s municipal government has been very supportive and shares a vision of developing art and culture,” she said. “We will be able to present high-quality art works sourced from overseas on the ground in mainland China.”
The art business has grown rapidly in recent years in Asia, powered by a growing army of affluent mainlanders who fly to Hong Kong for auctions of rare wines, jewellery and paintings.
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