Chen Danqing's painting Tibetan Series-Shepherd created in 1980 was sold for 35.8 million yuan ($4.9 million). Tibetan Series-Shepherd portrays the life of Tibetans with rich colors in a traditional European style of painting. Chen, born in 1953, was sent to work in the countryside as a youth during the "cultural revolution" (1966-76). In 1978, he began studying at the top art school in China, and later spent eight years in New York before returning to China to teach at Tsinghua University.

Western masterpieces began to enter the art auction market in China. An auction for Western paintings and sculptures was hosted by Beijing Huachen Auctions Co. in late 2007 in Beijing. Twenty-four pieces of art from abroad were displayed and half were sold, with a total transaction volume of 14.08 million yuan ($1.96 million). A piece by French Impressionist painter Pierre-Auguste Renoir fetched 11.2 million yuan ($1.64 million), the highest price offered for Western paintings auctioned in China.

What fuels the boom?

A more liberal art market, rising living standards and a sound legal framework brought prosperity to the art market, according to Zhang Yanhua, President of the China Association of Auctioneers.

Ancient Chinese people produced exquisite artwork. Artists enjoyed great social privileges. But during the "cultural revolution," relics reflecting backward feudal thoughts were ordered to be trashed and art collecting was condemned as a "bourgeois" activity.

After 1979, the dormant art market gradually reawakened. The first art auction house was established in the early 1990s. In the last two decades, hundreds of art auction houses have emerged. The most prominent one is China Guardian Co. Ltd. headquartered in Beijing.

Art galleries and museums have sprung up, which are primarily concentrated in Beijing and Shanghai; some are funded with foreign investment. In Beijing, art lovers often stroll through a number of famous art markets, including Panjiayuan Antique Market and 798 art gallery area.

Art markets outside Beijing and Shanghai are fledgling. At an art auction held in coastal Qingdao City, Shandong Province, in fall 2007, 460 paintings and calligraphy were displayed. The auction registered a total trade volume of 150 million yuan ($20.7 million).

Data from Sichuan Provincial Collectors' Association indicate that as of the end of 2007, there were about 3 million art collectors, of whom, 80 percent collected artwork for investment purposes in the province. Most art auction houses in the province opened one or two years ago. In December 2007, four auctions were held in the province, each drawing hundreds of bidders.

Entrepreneurs comprise the majority of active bidders, according to analysts of China's art market. President of the China Association of Collectors, Yan Zhentang, said that one fifth of its 5,000 registered members are business owners.

Now, people are encouraged to own financial assets, which spur the growth of art as an investment instrument. The first marriage between investment capital and a museum in China was recently made when Minsheng Banking Corp. Ltd. took over Yanhuang Art Museum in Beijing last year. The banking group's Guangzhou branch recently launched a high-end financial product for art investors, with expected annual returns as high as 18 percent.

In addition to economic incentives, a sound legal framework is indispensable to the development of the art market. China has promulgated several laws governing the auction of cultural relics. At the end of 2004, China lifted restrictions on foreigners trading artwork dated before 1949, as part of the country's commitment to the World Trade Organization. Big international auction houses such as Sotheby's and Christie's have entered China's mainland market.

Despite concerns over bubbles in the art market, art auction houses in China have stepped into another busy year. Two weeks into 2008, mycollect.net, a website for collectors in China, had already posted 12 auctions scheduled for January, with four in Beijing, two in Shanghai, two in Hong Kong and Macao, and the remaining four in other parts of China.