The Chinese fine art market has run out of steam after three years of phenomenal growth, with sales at auction plummeting sharply in 2012.

Even so, it still accounts for 41 percent of the global fine art auction in terms of turnover, ahead of the United States and United Kingdom, according to Artprice.com's latest report.

For the first time, the French art market watchdog released its 2012 art market review in conjunction with the Beijing-based Art Market Monitor of Artron, which monitors the Chinese art market.

The report examines the performance of both Western and Chinese fine art in sale rooms. It excludes ceramics, other antiques and furniture, and calculates hammer prices before such fees as the buyer's premium.

Chinese fine art realized just over $5 billion in sales last year, a decrease of more than 44 percent on 2011, while other categories - such as ceramics and other antiques - witnessed an increased market share.

Both the number of lots on offer, and those sold at auction, dropped, and the bought-in rate surged to 53.9 percent, an increase of 8 percentage points on 2008. Meanwhile, the Western market registered 37 percent for unsold lots.

In the Chinese market, six lots passed the threshold of $10 million, which was less than one-third of the number in 2011. The market suffered a shortage of high-priced auction items, while Chinese paintings and calligraphy in particular attracted medium- and low-end prices.

From a wider perspective, China has for the first time in three years lost its leading position in the international marketplace to the US, says The European Fine Art Foundation in its annual report.

In a global reshuffle of art sales, China secured a market share of 25 percent, dropping from 30 percent in 2011. The US regained the premier position with a 33 percent share.

TEFAF's research focuses on galleries and dealers, rather than just auctioneers, covering the performance of fine art, antiques and decorative art. It pays particular attention to the burgeoning art scenes in China and Brazil in 2012.

TEFAF's figures show that against the backdrop of a continued slowdown in economic growth, world art sales contracted by 7 percent to 43 billion euros ($55.6 billion) last year.

China played a key role in the decline, whose sales at auction and in the retail business fell 24 percent. The US market achieved an increase of 5 percent.

Both Artprice and TEFAF attribute a decelerating Chinese market to fewer high-quality items by blue-chip artists, even though auction houses have combed the world looking for such works. Reduced activity from art funds and trusts has also contributed to a soaring market performance.

"The Chinese art market has arrived at a bottleneck after nearly 20 years of rapid expansion. It needs to clear many obstacles to move forward," says AMMA's Guan Yu.

"Most artworks are overpriced and no longer have the potential for further growth in value. The market requires a comprehensive regulatory system to curb such malpractices as selling counterfeits and hyped-up marketing."

She says that art galleries are finding it difficult to remain competitive as auction houses develop their business into fresh areas.

She adds that galleries lack favorable tax policies and professionals who are knowledgeable about art, and have management and marketing experience.

By Lin Qi (China Daily)