SHANGHAI: Large mainland corporations are discovering that supporting the arts may pay off financially and their clout may give Chinese contemporary art, which is already on the upswing, one more push.

In the last decade, Chinese contemporary art has seen a steady climb in price and popularity in international and domestic markets. This climb has led to record prices at international auctions held by Christie's and Sotheby's where single paintings have fetched millions of yuan.

"China's art market is still far from its peak because most of the country's business giants are not involved in it yet," says Guo Qingxiang, chairman of Yuebaozhai Art Investment Co Ltd, an arm of the Dalian Wanda Group. Wanda is a multi-layered corporation with interests ranging from properties and shopping malls to factories.

Although famous for its sponsorship of one of China's best football teams in Dalian, Liaoning Province, Wanda may have been the first of China's top enterprises to invest in art. It set up the art investment arm in 1993, long before Chinese art became the flavour of the day.

At the time, the doors to the West were beginning to swing wider but the art craze had not yet taken hold.

Now, more than a decade later, there are rumours of other giants getting into the game.

"Word is going around that some other top enterprises, namely the electronic appliance producer Haier Group and the tobacco giant Hongta Group, are making their first forays into the art market," says Guo.

Both groups declined to comment.

Still, more and more corporations are beginning to get into the game and discovering that supporting art may have a dual benefit. It can lead to a publicity or a public relations coup while helping with the bottom line by cutting down on income taxes.

Tax breaks are now emerging as a factor that may make further investment in art more attractive. Although common in Western countries, where governments encourage investment in culture with tax deductions and income-tax breaks, the practice is just now making its way to China.

Some Chinese businesses are discovering that buying art may be its own payoff when the time comes to pay the taxman.

Companies have a growing enthusiasm for art investment because they have found it a good way to cut down on the amount of corporate income tax they pay, says industry-veteran Shi Jianbang, editor-in-chief of Shanghai-based Art Dealer.

"They buy art and deduct the purchase as an expense in their balance sheets," he says.

Although tax breaks for art purchases are still far from common across the country, one province may be blazing a trail for others to follow.

"It has been a common practice for both large and small- and-medium sized private companies in East China's Zhejiang Province.

"The local tax authorities are encouraging the practice. The province's tax authorities recently published a policy to give businesses official approval to deduct their purchases of art as an expense in their balance sheets," says Shi.

Even if the promise of more widespread tax breaks is far off, the trend towards more art investment is evident. Property developers were among the first to link art and profits by putting their money where other's brushes or chisels had been.

New developments have become a common renue for art shows and galleries - some high profile. The shows not only give publicity to the artists but also put the development in the public eye.

At the same time, art can elevate new buildings from a mere place to live into a home for those with delicate sensibilities - and the wallets to go with that.

"If I want to sell an apartment, I won't make people feel I am selling an apartment - I focus their attention on something more interesting, more lofty, like art. That's how I made my money," says Pan Shiyi, whose company developed the famous SOHO development in downtown Beijing.

In the last few years, China's real estate developers have become enthusiastic art buyers.

Unlike corporations who buy art quietly looking for tax breaks, developers often launch media campaigns to go along with significant purchases.

Tiandi Real Estate Investment Co Ltd in Nanjing, capital of East China's Jiangsu Province, earned national renown last June when it paid 69.3 million yuan (US$8.35 million) for an album by ink painter Lu Yanshao (1909-1993) at an auction in Beijing.

The price, which looked exaggerated to many industry insiders, broke Chinese art records for a single lot at auctions around the world.

"The precious work of art will be exhibited regularly at the Tiandi Art Museum under construction in Tiandi Garden, a real estate project by our company in Nanjing," says Yang Xiu, the company's chairman.

Yang is not the first Chinese real estate developer to make a gallery or a museum the selling point of expensive apartment buildings.

Zhang Baoquan, general manager of Kingdom Real Estate Development Co Ltd, became a celebrity in Beijing's art scene after he appointed himself curator of a gallery in 2002.

The gallery, however, was proof that investment in art can be a financially risky proposition.

His gallery, Today Gallery, was built inside Kingdom Garden, a cluster of luxurious apartment buildings his company developed five years ago in Beijing's central North Third Ring.

Ads for the development left little to the imagination: "Choose Kingdom Garden, Join Vanguard Art."

Although most of the capital's vanguard artists live in inexpensive suburban homes, Zhang's gallery managed to accumulate a large collection of vanguard art while securing for itself a more high profile spot within Beijing's cultural scene.

The gallery held exhibitions for ambitious young vanguard artists, who consigned their works to the company, says Zhang's deputy at the gallery Shang Fang.

In itself, however, the gallery has not been a money-making venture. Rather, the artworks help raise the profile of the development.

"The gallery has been losing more than 500,000 yuan (US$60,200) annually since it was founded in 2002," said Shang.

"A major piece of vanguard art can rapidly bring a gallery fame but not necessarily money. The market still has a preference for 20th century art," Zhang says.

Eventually the real-estate-developer-turned-curator finally let the art gallery go at the end of last year and, in a quiet move, rented the space out to a publishing house.

The experiment did not dissuade other developers from linking their projects with art.

Since the closure of Today Gallery, Ocean Art Center in northeastern Beijing has emerged as a major venue for vanguard art.

Ocean Art is located at the gate of "Ocean Paradise," an apartment building cluster in northeastern Beijing.

Both the venue and the buildings are investments of the real estate development arm of China Ocean Shipping (Group) Company (COSCO).

(China Daily 07/18/2005 page8)