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People in China's growing economy are famous for saving money rather than spending it. But at a recent Hong Kong art auction, some people were ready to consume.

RENEE MONTAGNE, HOST:

The buyers drove prices up to triple the heights that were expected. The website ArtPrice.com, which tracks art sales, shows China is the world's largest art market, but people are not always buying what they think they are.

INSKEEP: NPR's Louisa Lim starts her report by looking at the $11 million painting that wasn't.

LOUISA LIM, BYLINE: The young girl in the painting stands naked against a burgundy backdrop, one leg bent, an elbow crooked behind her back. Her eyes downcast, she looks shy and uncomfortable. The auction house says this is a painting by a famous artist, Xu Beihong, of his wife. A note from his son vouches for that, though the artist died in 1953. The painting sold for $11 million last year. But Wang Yanqing, a 66-year-old painter, tells another story. He says the picture was one of several painted by art students 30 years after the artist's death. And the model was a simple peasant farmer. Wang was one of those students and the memory of those three weeks he spent painting her is crystal clear.

WANG YANQING: (Through translator) At that time it was very difficult to find nude models, so we painted the same ones over and over and it was boring. Suddenly, this new model came - a young girl from the South - and everyone was very excited. We all wanted to draw her, so almost 20 of us crowded into the same room. It was one of my most successful pictures. I still have it in my studio.

LIM: Indeed, his painting's subject is identical to that of the $11 million picture, except for the angle. Four other classmates have produced pictures of the same girl, same pose, same backdrop. As Wang points out, it's an impossible coincidence. He says it's laughable anyone could have believed this was Xu Beihong's wife, since the model doesn't look anything like her. The fact that this mediocre picture by an art student was sold for $11 million is breathtaking. But Gong Jisui, a former Sotheby's expert who's now a visiting scholar in Beijing, says such cases are not isolated.

GONG JISUI: At this moment, in practice there is no standards. It's really, really bad for the classical Chinese paintings. Most of the pieces are disputable.

LIM: Most of the pieces are disputable?

JISUI: Yes.

(SOUNDBITE OF AUCTION)

LIM: It's not just the pieces that are fake. At Chinese auctions, the bids are often fake too. Sometimes the seller, or even the artist, bids on their own pieces to push the prices up. Sometimes auctions are used to pass bribes. For example, the buyer overbids for something mediocre - or even fake - and so passes money legally to the seller. Many auction houses turn a blind eye, since the higher the price, the higher their commission. Paul Dong from Forever Auctions, the trademark licensee for Christies in China, describes how the approach is made.

PAUL DONG: There are some clients at certain times coming to us and, OK, don't look at the quality of my property, I can assure you someone will come and buy it for a very high price and you earn your money. So we will absolutely reject such offer to us.

LIM: And then there's the problem of payment - or lack of payment.

UNIDENTIFIED MAN: It's 43 million pounds. Sold.

LIM: A Qing dynasty vase broke all records when it sold in London for 43 million pounds, or $70 million, last November. For months, the Chinese buyer refused to pay up. It's understood some money has now changed hands, but it's not clear how much. But it's a sign that as Chinese buyers spend more overseas, dodgy auction practices are being exported too. Inside China, non-payment for winning bids is endemic. Ou Shuying of the Chinese Association for Auctioneers says it's just compiled statistics on this for the first time.

OU SHUYING: (Through translator) Of those star lots that sold for more than $1.5 million in last year's autumn sales, 40 percent of those bills had not been settled by the end of this April.

LIM: Insiders say even that is a very conservative estimate. And the higher the price, the more likely it is not to be paid. Whether they're paid or not, those record prices still stand, inflating the whole market. And the effects are trickling out into the entire economy. In one case, businessman Xie Genrong made a fake ancient jade burial suit. He got five top experts to value it at $375 million. Using that as collateral, a bank gave Xie a $100 million loan for a real estate project. Appraiser Zhang Ning went to see the jade burial suit on display and immediately had doubts.

ZHANG NING: (Through translator) For a start it was violating the law. If it had been unearthed in a dig, there's a law that says archaeological objects can't be traded or sold. So the experts should have never given it that estimate. It's likely the experts knew it was fake.

LIM: The businessman Xie is now serving a jail term. One issue is that Chinese auction houses are not responsible for the authenticity of the goods they sell, as long as they issue a disclaimer. Many now believe China's auction law must be changed. But the problem is that the fakery is endemic. In all too many cases, the art is fake, the bids are rigged, the experts are crooked, and the bills are never settled. It's difficult to know what is real, except the corruption. Louisa Lim, NPR News, Beijing.

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