Thursday, April 16, 2020

Is China winning?

April 16th 2020Read in browser
 The Economist this week 
 Highlights from the latest issue 
 Our cover this week asks whether China will be the pandemic’s big geopolitical winner. Its attempt to cover up the virus was disastrous, but its lockdown seems to have worked. The number of newly reported cases of covid-19 has slowed to a trickle. Factories in China are reopening. Researchers are rushing candidate vaccines into trials. Meanwhile, the official death toll in China has been far exceeded in Britain, France, Spain, Italy and America. Some, including nervous foreign-policy watchers in the West, warn that the pandemic will be remembered not only as a human catastrophe, but also as a geopolitical turning-point away from America. Are they right?

Pandemic geopolitics
Is China winning?

The geopolitical consequences of covid-19 will be subtle, but unfortunate

LeadersApr 16th 2020 edition

Editor’s note: The Economist is making some of its most important coverage of the covid-19 pandemic freely available to readers of The Economist Today, our daily newsletter. To receive it, register here. For our coronavirus tracker and more coverage, see our hub
This year started horribly for China. When a respiratory virus spread in Wuhan, Communist Party officials’ instinct was to hush it up. Some predicted that this might be China’s “Chernobyl”—a reference to how the Kremlin’s lies over a nuclear accident hastened the collapse of the Soviet Union. They were wrong. After its initial bungling, China’s ruling party swiftly imposed a quarantine of breathtaking scope and severity. The lockdown seems to have worked. The number of newly reported cases of covid-19 has slowed to a trickle. Factories in China are reopening. Researchers there are rushing candidate vaccines into trials (see Briefing). Meanwhile, the official death toll has been far exceeded by Britain, France, Spain, Italy and America.
China hails this as a triumph. A vast propaganda campaign explains that China brought its epidemic under control thanks to strong one-party rule. The country is now showing its benevolence, it says, by supplying the world with medical kit, including nearly 4bn masks between March 1st and April 4th (see article). Its sacrifices bought time for the rest of the world to prepare. If some Western democracies squandered it, that shows how their system of government is inferior to China’s own.
Some, including nervous foreign-policy watchers in the West, have concluded that China will be the winner from the covid catastrophe. They warn that the pandemic will be remembered not only as a human disaster, but also as a geopolitical turning-point away from America.
That view has taken root partly by default. President Donald Trump seems to have no interest in leading the global response to the virus. Previous American presidents led campaigns against hiv/aids and Ebola. Mr Trump has vowed to defund the World Health Organisation (who) for its alleged pro-China bias (see article). With the man in the White House claiming “absolute power” but saying “I don’t take responsibility at all”, China has a chance to enhance its sway.
Even so, it may not succeed. For one thing, there is no way to know whether China’s record in dealing with covid-19 is as impressive as it claims—let alone as good as the records of competent democracies such as South Korea or Taiwan. Outsiders cannot check if China’s secretive officials have been candid about the number of coronavirus cases and deaths. An authoritarian regime can tell factories to start up, but it cannot force consumers to buy their products (see article). For as long as the pandemic rages, it is too soon to know whether people will end up crediting China for suppressing the disease or blaming it for suppressing the doctors in Wuhan who first raised the alarm.
Another obstacle is that China’s propaganda is often crass and unpleasant. China’s mouthpieces do not merely praise their own leaders; some also gloat over America’s dysfunction or promote wild conspiracy theories about the virus being an American bioweapon. For some days Africans in Guangzhou were being evicted en masse from their homes, barred from hotels and then harassed for sleeping in the streets, apparently because local officials feared they might be infected. Their plight has generated angry headlines and diplomatic rebukes all over Africa.
And rich countries are suspicious of China’s motives. Margrethe Vestager, the eu’s competition chief, urges governments to buy stakes in strategic firms to stop China from taking advantage of market turmoil to snap them up cheaply. More broadly, the pandemic has fed arguments that countries should not rely on China for crucial goods and services, from ventilators to 5g networks. The World Trade Organisation expects global merchandise trade to shrink by 13-32% in the short run. If this turns into a long-term retreat from globalisation—which was already a worry before covid-19—it will harm China as much as anywhere.
More fundamental than whether other countries are willing to see China supplant America is whether it intends to. Certainly, China is not about to attempt to reproduce America’s strengths: a vast web of alliances and legions of private actors with global soft power, from Google and Netflix to Harvard and the Gates Foundation. It shows no sign of wanting to take on the sort of leadership that means it will be sucked into crises all across the planet, as America has been since the second world war.
A test of China’s ambitions will be how it acts in the race for a vaccine. Should it get there first, success could be used as a national triumph and a platform for global co-operation. Another test is debt relief for poor countries. On April 15th the g20, including China, agreed to let indebted nations suspend debt payments to its members for eight months. In the past China has haggled over debt behind closed doors and bilaterally, dragon to mouse, to extract political concessions. If the g20’s decision means the government in Beijing is now willing to co-ordinate with other creditors and be more generous, that would be a sign it is ready to spend money to acquire a new role.
Perhaps, though, China is less interested in running the world than in ensuring that other powers cannot or dare not attempt to thwart it. It aims to chip away at the dollar’s status as a reserve currency (see article). And it is working hard to place its diplomats in influential jobs in multilateral bodies, so that they will be in a position to shape the global rules, over human rights, say, or internet governance. One reason Mr Trump’s broadside against the who is bad for America is that it makes China appear more worthy of such positions.
China’s rulers combine vast ambitions with a caution born from the huge task they have in governing a country of 1.4bn people. They do not need to create a new rules-based international order from scratch. They might prefer to keep pushing on the wobbly pillars of the order built by America after the second world war, so that a rising China is not constrained.
That is not a comforting prospect. The best way to deal with the pandemic and its economic consequences is globally. So, too, problems like organised crime and climate change. The 1920s showed what happens when great powers turn selfish and rush to take advantage of the troubles of others. The covid-19 outbreak has so far sparked as much jostling for advantage as far-sighted magnanimity. Mr Trump bears a lot of blame for that. For China to reinforce such bleak visions of superpower behaviour would be not a triumph but a tragedy. 
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This article appeared in the Leaders section of the print edition under the headline "Is China winning?"

buying art

    Are People Actually Buying Art in the Coronavirus Era? Yes—as Long as It’s by a Freshly Minted Art Star (or Being Sold at a Discount)

    During the first month of lockdown, few deals went down, despite a raft of new online viewing rooms. Some say the worst is yet to come.
    Who Cares Wins by Harland Miller at Sotheby's Art for Grenfell press preview on October 12, 2017, in London. The artist has released a similar print with White Cube to benefit relief efforts. (Photo by Chris J Ratcliffe/Getty Images for Sotheby's)
    Who Cares Wins by Harland Miller at Sotheby's Art for Grenfell press preview on October 12, 2017, in London. The artist has released a similar print with White Cube to benefit relief efforts. (Photo by Chris J Ratcliffe/Getty Images for Sotheby's)
    Asked how their business is doing this spring compared to one year ago, the dealers Dominique Lévy and Brett Gorvy look puzzled. They reject the premise of the question. “You have to compare apples to apples,” Gorvy says.
    We are speaking over Zoom—a far cry from 2019, when we crossed paths during Art Basel Hong Kong, where the dealing duo was opening a new gallery and making multi-million-dollar sales. This year, Lévy says, “the world is a different place. We’re in black and white circumstances.”
    Like other galleries, Lévy Gorvy has swapped expos in metropolises around the world for online viewing rooms and digital fair platforms. And while the wave of innovation and collaboration this era has ushered in is all well and good, the question remains: Did any of the world’s top galleries, auction houses, and art advisors really sell any serious contemporary art during the first month of lockdown?
    After talking with more than a dozen market payers, a picture emerged of once-global elite now working from home (or, often, their second home), spending the days adapting to a new reality. Yes, some things are selling, but with the entire in-person infrastructure placed on hold, the volume of what’s trading hands is a fraction of a fraction of what it was a year ago—and only a narrow segment of the market is reliably active.
    The conversations reveal that, for all its emphasis on online bells and whistles, the art market remains, at its heart, an in-person enterprise.
    The interface for the online version of the Dallas Art Fair, which launched Tuesday. Photo courtesy Dallas Art Fair.
    Speculated-upon superstars who, until last month, minted canvases as currency have seen their markets get a haircut overnight. Paintings that could flip for $500,000 two months ago suddenly can’t find homes for $200,000. One advisor who brokers deals primarily for high-end clients looking for expensive secondary-market works said that they were “literally selling nothing.”
    “There’s just no secondary market right now, unless it’s at discounted, distressed, or very reasonable princes,” another advisor said.
    On the primary market, collectors are still going after work in the $40,000 to $70,000 range, but primary market deals inked last month rarely topped the $100,000 threshold. “The only regular business I’ve done is in-demand primary artists under $100,000,” another advisor said. “I did one a day last week. During a normal busy time, that’s not a lot of business.”

    Smaller Numbers, Little By Little

    At the start of the lockdown—just a calendar month ago, but what for some feels like an eternity of chaos—things seemed somewhat optimistic. After a month and a half of build-out, Art Basel Hong Kong’s online edition opened on March 18 with 235 galleries and a total of $270 million worth of art.
    There, mega-galleries achieved something that was once commonplace, and is now a unicorn: the seven-figure sale. David Zwirner sold a painting by Marlene Dumas for $2.6 million and a painting by Luc Tuymans for $2 million, while Gagosian sold a Georg Baselitz for nearly $1.3 million.
    But in the weeks that followed, the very real danger of the virus began to set in. “The people who we were reaching out to, that conversation was not about buying pictures, it was about friendships, and saying, ‘Are you OK?'” Gorvy said.
    One advisor said that they were using the time to write long letters to their clients, telling them to seize the moment to research new artists—not to necessarily to convince them to pull the trigger on anything.
    As March turned to April, some advisors did tastefully bring up acquiring contemporary art—but it’s been a decidedly mellow period for transactions. Advisor Lisa Schiff said she sold just two works above $100,000, and instead focused on what would usually be considered—for an advisor with offices in Tribeca and Hollywood and a client list that has included Robert de Niro, Leonardo DiCaprio and Meg Ryan—on the lower end of things. On the secondary market, Schiff mentioned that she had negotiated the purchase of a relatively inexpensive Sherrie Levine drawing.
    “It’s just a different approach,” Schiff said. “Things are selling, we’re doing some primary market, and we did more secondary stuff mostly in smaller numbers, little by little.”
    Harold Ancart’s Untitled (2020) which sold for $40,000 in the David Zwirner viewing room. Photo courtesy David Zwirner.

    What’s Actually Selling

    The primary market continues to churn, particularly for work by artists who were in high demand before the crisis hit. That’s bad news for long-suffering clients seeking an opportunity to leapfrog a waitlist, but a good news as a sign of confidence for the market. “I still can’t get an Njideka Akunyili Crosby primary for my best clients,” Schiff said.
    Among the more sought-after figures right now, according to another advisor, are Asuka Anastacia Ogawa—whose solo show at Blum & Poe’s Tokyo space was set to make a splash this spring before getting postponed—Jennifer Guidi, and Shara Hughes. Hauser & Wirth sold out of its viewing room presentation of drawings by George Condo, priced at $125,000 (with 10 percent of the sales going to COVID-19 relief efforts) and Zwirner sold out of its virtual presentation of Harold Ancart’s new pool works, priced at $40,000.
    There is also an understanding that low supply can help with what may be lower demand. While it also has online viewing rooms galore, the Artist Spotlight program at Gagosian makes available just one work each week, and last Friday a new work by Sarah Sze sold for $250,000.
    Some galleries, meanwhile, are taking the opposite approach, and releasing editions in high numbers priced low in order to crowdsource the buying. White Cube released 250 editions of a new work by Harland Miller priced at £5,000 and they all sold in 24 hours—all of the £1.25 million raised going to a number of causes tackling the pandemic.
    And other galleries are having luck selling more established artists well past mid-career status. Lévy Gorvy sold a work from its online show of Chinese artist Tu Hongtao and another from a viewing room by the centenarian French artist Pierre Soulages—who was born not long after the Spanish flu pandemic. It sold for somewhere in the range of $870,000 and $1.3 million.
    One way to restart the market, on both the primary and the secondary sides, is to entice buyers with slashed prices. While some speculators are unwilling to part with what were once ready-to-flip works at a loss, some dealers are already offering eye-popping discounts.
    “A mid-level New York gallery just sent an email saying that for the month of April, it’s 30 percent off everything,” an advisor said. “It’s crazy. It’s like Net-a-porter.”
    László Moholy-Nagy, ‘UMSCHLAG FÜR DIE ZEITSCHRIFT “BROOM”’ (PHOTOGRAM ‘COVER FOR THE MAGAZINE “BROOM”‘) which sold at Sotheby’s earlier this month. Photo courtesy Sotheby’s.

    The Last £30 Million Sale?

    With all the real-life salesroom action on hold for the time being—and many expect the June sales to be postponed as well, or at least reimagined in a radically social-distance-y way—major auction houses have, like their gallery peers, turned to the great salesroom in the sky. The performance of online auctions has been somewhat middling, with the highlight being a László Moholy-Nagy work that sold in a Sotheby’s photo sale for $524,000—still below its high estimate.
    The real action, however, is happening in private sales, according to the auction-house duopoly of Christie’s and Sotheby’s. (Phillips just launched its private sales portal—er, its online viewing room—this week, and does not have sales details yet.) This shift makes sense, since the total number of auctions held around the world and the number of lots sold dropped by 25 percent in March 2020 compared to the same month the previous year, according to analysis by the Artnet Price Database—and some of that squeezed-out activity needed a place to go.
    At Sotheby’s, private sales went up immediately as the crisis was hitting, and department head David Schrader said that they have closed 30 deals in the last two weeks. “As is not uncommon during times of economic uncertainty, our conversations and negotiations with clients around private sales have increased significantly since the beginning of March, regarding both buying and selling works,” Schrader said in an email. “We are seeing significant appetite to transact right now, particularly when the best objects are available. Interestingly, we are seeing more demand from buyers than sellers at the moment.”
    Meanwhile, sources within Christie’s say that private sales are up 27 percent compared to the first quarter of 2019. And according to a spokesperson, one deal brokered by the auction house had the gobsmacking price tag of £30 million—which means it resulted in a £4.05 million buyer’s premium for the house, likely more than perhaps any other sale, across all platforms, in the past month.
    Who, and what, is actually driving the demand? There’s word that Asian buyers from countries that have relatively stabilized economies have been very active in private sales at Christie’s. And, separately, sources said that some transactions are actually coming out of all the work employees are putting in to beef up online content. One collector is said to have discovered a work from an article in Christie’s content section that went up a few days ago, took a fancy to it, and bought it from the website. (Christie’s would not confirm the work, but the auction house recently published a story about the Jean-Michel Basquiat drawing Untitled (Dynamic Tension), which was previously in the collection of Andy Warhol.)
    Installation view, Tu Hongtao, Lévy Gorvy Hong Kong, 2020. Photo: Kitmin Lee. Photo courtesy Levy Gorvy.

    Twice the Hard Work for a Quarter of the Real Business

    Regardless of how many transactions are initiated this season, the true test will be whether money actually manages to change hands. A number of sales, particularly those priced in the seven figures, are currently on hold. “If you’re spending millions of dollars, you want to see the work, and it’s hard logistically to show it,” Schiff said.
    Any success will be hard-won. A source on the online content side of a mega-gallery said that they have been working late in the night in order to put together new viewing rooms for exhibitions. And independent dealers and advisors are also burning the midnight oil to keep their businesses afloat.
    “You have to work twice as hard to get a quarter of the business done, but it’s worth it and it’s crucial to keeping our businesses alive,” said the advisor Meredith Darrow. “I didn’t sign up for a desk job, but that’s what I have now. I’m at my desk from 8 a.m. from 7 p.m. every day. It’s boring and its laborious but there is something gratifying about it and at the end I’ll come out a better dealer.”
    Brett Gorvy is also aware that such transactions often require in-the-flesh confirmation before cutting a check; the client who bought the Soulages, for example, saw the painting with their own eyes before the gallery closed. One solution some dealers are trying? Making appointments for collectors to see the work in the real gallery, in a really private viewing room, as long as all social-distancing measures are followed.
    “The most challenging aspect is, how do you get in front of the work itself?” Gorvy said. “We’re trying to get people into a completely empty and clean safe space, if that is feasible. We’re talking about incredible challenges, but there are people who are willing to do this.”

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