Art's New Pecking Order

On the outskirts of Beijing in a private club house called Paradise, there is a large, windowless room where Yang Bin displays his collection of modern and contemporary art.

"Sit down and get ready," Mr. Yang recently told a few friends visiting from Taiwan. Grabbing a remote control, he turned to a set of wall panels that, with a click, began to slide apart. Each panel revealed a few of his recent acquisitions, from Chairman Mao-era portraits of revolutionaries to brightly colored abstracts by China's rising stars. As his friends applauded the slide-show, Mr. Yang grinned and lit a cigar.

The art market is being transformed by Chinese collectors willing to pay top dollar for everything from Ming vases to contemporary Chinese abstracts. In some cases, these works are outstripping prices paid for blue-chip Western artists like Ren Magritte and Clyfford Still.

Three of the 10 most expensive art works sold at auction last year were by Chinese artists, according to art-market analyst Artprice. Last year's priciest painting: "Eagle Standing on Pine Tree" by self-taught painter Qi Baishi. This delicate scroll rocketed ahead of colorful canvases by Pablo Picasso, Roy Lichtenstein and Andy Warhol when it sold for $65 million at auction house China Guardian in May. Overall, purchases by Chinese collectors accounted for roughly a fifth of Christie's global sales during the first half of last year; Sotheby's says mainland buyers also lifted its sales in Asia to nearly $960 million last year, up 47% from 2010.

Welcome to China's rollicking art world, a marketplace flush with wealthy entrepreneurs who are amassing art at a clip to rival any Russian oligarch. From Beijing to Chongqing, collectors are building private museums, opening galleries and embracing an exuberant art scene, even as China's economy shows early signs of a slowdown and many collectors elsewhere are buying more cautiously.

Mr. Yang, age 54 and one of Beijing's biggest car dealers, is emblematic of the new wave of Chinese collectors: Over the past decade, he has collected nearly 1,000 artworks by contemporary heavyweights like Chen Yifei, who paints women in romantic interiors, and Zhang Xiaogang, known for haunting family portraits. Mr. Yang's art choices are closely tracked by the region's top collectors and dealers. He has financed the opening of a pair of edgy art galleries in Beijing, one of which is managed by his wife, Yan Qing. Last year he began importing and reselling collectible wines like Bordeaux.

The collectors in his broader circle include Qiao Zhibing, a nightclub owner based in Shanghai. Mr. Qiao is outfitting his four-story karaoke bar, Shanghai Night, with conceptual sculptures by Ai Weiwei, sleek photographs of Champagne-drinking partygoers by Yang Fudong and paintings of men in suits and smiling face masks by Zeng Fanzhi. Behind Mr. Qiao's cashier's desk looms Beijing artist Ji Dachun's large painting of an eyeball.

Another friend, Beijing hotelier Zhang Rui, has started decorating every room in his new Gallery Hotel with pieces borrowed from a gallery called Tang. He also has an 800-piece collection of his own. The hotel hasn't opened yet, in part because Mr. Zhang recently spent 18 months in detention for allegedly bribing a Party secretary. Mr. Zhang denies making any bribe but says he did pay a fine as a condition of his release last June, and he's now seeking the remaining building permits.

"It's not enough in China to be wildly wealthy," says Meg Maggio, director of Pkin Fine Arts, a Beijing gallery specializing in contemporary art. "For all these guys, it's about building a beautiful way of life—they want the nice objects, the good wine, the whole package."

Alan Lee, who runs Beijing gallery Asia Art Center, says one of his clients, a fitness-equipment manufacturer named Chang Chiu Dun, calls himself the "Cover Killer" because he "likes to buy artworks that have been on the covers of auction catalogs."

The downside, Mr. Lee says, is that this influx of newly wealthy collectors is fueling risky speculation on art, leading to price swings and heavy trading volumes for younger artists like the eyeball painter, Ji Dachun, whose lasting significance is still uncertain. Art advisory firm Artvest says Chinese investors have recently started at least eight art funds, which buy artworks with the aim of reselling them at a profit later. There are only about 20 similar funds elsewhere in the world.

China's gallery scene is similarly freewheeling, with collectors such as Mr. Yang sometimes serving as stakeholders or co-owners of galleries where they also shop. Such arrangements can spark potential conflicts of interest because the stakeholders might be able to leverage their position to claim the gallery's choicest pieces. Seven years ago Mr. Yang paid to help his wife open her contemporary art gallery, Aye, but he says he doesn't manage her artists or get first dibs on any work she shows there. He recently stepped back as a financing partner in another contemporary art gallery he founded three years ago, Eastation, in order to focus on his wine venture. He continues to buy art from both galleries.

Dealers and artists say it's unclear whether Mr. Yang is trying to build a museum-worthy collection or angling for the right moment to cash out. "China's market is still so new—it's hard for us to tell who's a collector and who's a speculator," says artist Zhang Xiaogang.

Mr. Yang isn't troubled by such ambiguity. "I can't say if investing in art is good or bad," he says, "but I know that without money, you can't make a market grow."

Within China's contemporary art circles, Mr. Yang is hard to miss. He's tall, with a square face and thick head of black hair. He shows acquaintances cellphone images of his art the way others pull up snapshots of their children. More often than not, he turns up at black-tie dinners dressed in a polo shirt, black corduroys, and sneakers.

In Hong Kong, he socializes with collectors like Credit Suisse banker Tony Chiu and BNP Paribas banker Daisy Cheng. Both say they've sought his advice about artists to collect. In Beijing, his penthouse apartment doubles as a lunch spot for a growing crop of young entrepreneurs and investment bankers, some of whom half-jokingly call him "President Yang."

Mr. Yang has rapidly built up his collection in part by maintaining a breathless pace—he sometimes buys dozens of works at a single auction or hundreds of works from a gallery or artist he likes, he says. When he's not working in one of his six car dealerships in Beijing, he and his entourage are regulars at art fairs and auctions throughout Asia and Europe.

This year, Mr. Yang's favorite prospect is Liu Wei, a Beijing artist best known for using leathery dog chews to build a miniature city. Two months ago, Mr. Yang flew to Hong Kong and paid boutique auctioneer Ravenel around $123,000 for Mr. Liu's 1999 canine portrait, "Dog No. 2." A few days later, several works by the same artist sold for twice as much at an auction back in Beijing.

Mr. Yang says the artist remains undervalued, despite investment by prominent Western collectors like Mr. Saatchi: "Liu Wei isn't a pop star" like Zeng Fanzhi, a painter represented by New York dealer Larry Gagosian, he says, "but I think he's as important."

Mr. Yang has also started offloading a few older pieces by Chinese realist artists like Chen Yanning as demand for their works has climbed. Last month, Mr. Yang arrived at a Beijing luxury hotel and made his way into the packed salesroom of Poly, China's biggest auction house. He stood in the back, his usual spot. Halfway through the sale, he pointed to a large painting of a boatful of people hanging on the far wall. "That's mine," he said. He had paid roughly $60,000 for the 1984 work, "New Wave," by Chen Yanning seven years earlier, and was ready to sell. Poly priced the work to sell for at least $629,000. When the bidding began, at least five collectors took the bait and the winner paid $1 million, a new price record for the artist.

Minutes before the bidding began, Mr. Yang slipped downstairs so he could smoke while watching a live broadcast of the sale on a television in the hotel bar. After the gavel fell, he slapped the shoulder of the man beside him and laughed. Later, he heard that the winner was a "coal boss" from Shanxi province.

At the same sale, Mr. Yang did some potentially strategic bidding of his own—on an artist represented by his wife's Aye Gallery. Mr. Yang enlisted a taller friend to stand in front of him and bid for one of Chen Wenji's photorealistic paintings from 1990, "A Piece of Glass Leaning on Wall." Mr. Yang and his friend bowed out after other bidders pushed the price to more than double the work's $125,800 high estimate. It ultimately sold to a telephone bidder for $361,663, the artist's second-highest auction price.

Two days later, "What," a show of Mr. Chen's new works, opened at Aye. Mr. Yang says he bid on the work in part because early works by Mr. Chen are rare, and he doesn't own any, despite his wife's affiliation with the artist now. In addition, if he could help his wife's gallery by "keeping prices in a reasonable range, this would be good for the artist," he says.

Ms. Maggio, the Beijing dealer, says she doesn't think Mr. Yang follows any pattern intended to boost his works' values. More often, she says, he seems to bid on a whim, cajoling his friends to join in and reveling in the competition. "He'll nudge some guy with him and say, 'Buy it! You just made a lot of money!' and they'll put up their paddles," she says. "It's done in a spirit of fun—it's not calculated."

The grandson of a Shandong farmer and the son of a Beijing factory worker, Mr. Yang grew up in Beijing during the Cultural Revolution. In 1978, he joined one of the first waves of students allowed into the country's reopened colleges. He studied political economics.

After college, he got a job at the Ministry of Machinery, where he formed ties with foreign banks and car manufacturers so he could help the government import cars for state use. There, he met his wife, who worked as a machinery designer in an office down the block from his communal dorm; they married in 1988.

When the government began allowing individuals to start their own companies a few years later, the couple leveraged their contacts and won a contract with General Motors to sell Buicks, Chevrolets and Cadillacs in China. In 1999, they opened Shanghai's first GM dealership, Da Shi Hang Auto. In the first year alone, they sold 1,000 Buicks. Ms. Yan began organizing regional auto shows, and the couple bought a big empty house in Shanghai.

"That's when we realized we needed something for the walls," says Mr. Yang, who sold around 11,000 cars last year through his seven showrooms in Shanghai and Beijing. He drives a black Cadillac Escalade.

In 2000, he paid a local gallery around $120,000 to fill their home with suitable paintings, but over time he grew curious about the artists themselves. A year or two later, he spotted a roughly $84,000 painting of a starkly lit human figure by contemporary artist Shi Chong, and something clicked: He wanted to own artworks that felt new.

By 2004, he and Ms. Yan had moved back to Beijing and his compulsion had reached a point where he decided to sell his newer Toyota franchise so he could use the cash to buy art. Within weeks of closing that deal, he had spent the entire $3.6 million in profits buying art. "When we see something we like, we can't help ourselves," said Ms. Yan.

Last month in Beijing, Mr. Yang threw a wine-tasting dinner for more than 100 guests at his friend Mr. Rui's new hotel. Artworks were tucked into niches throughout the hotel's white lobby—including an Anne-Julie video of a horse walking on a treadmill—and the upper hallways were dotted with showstoppers like the Yangjiang Group's drippy candle wax tree. Young men and women clustered around the restaurant's tables, dining on lamb chops and vigorously swirling glasses of Chteau Beau-Sjour Bcot.

Mr. Yang's latest pastime is fine wine. He tried it for the first time shortly after he opened his first car dealership, and he now drinks a glass or two every day. He keeps his best 2,000 bottles, including Bordeaux from Chteau Latour, in Hong Kong so that he can drink it during business trips there and avoid paying taxes to import it home. Last year, he imported 20,000 bottles of less-expensive vintages so he could try selling them to mainland friends. So far, his wine sales have topped $3 million, which he says he uses to pay his personal wine-drinking bills.

In May, Mr. Yang and Ms. Yan moved into a new apartment, an 18th-floor penthouse in a Beijing neighborhood known as the Embassy District. Throughout their home, artworks are arranged to mix East with West. In the dining room, American artist Roxy Paine's linen canvas drips with white paint near a life-size sculpture of an obese Asian man belly-flopping onto a waist-high block of faux ice. Embedded in the man's back are a group of upturned Champagne flutes, one of which accidentally snapped off during a recent party there. The work's sculptor, Mu Boyan, sent over a replacement flute straight away. He shows at Ms. Yan's gallery.