Demand plummets as economic growth slows, but business picks up in the US.

Total sales at China’s two dominant auction houses—Poly Auction and China Guardian—more than halved during 2012. Sales at Sotheby’s and Christie’s in Hong Kong also fell, wiping $2.4bn off the country’s art market, which by some calculations was the world’s largest at the beginning of 2012.

At China’s largest ­auctioneer, Poly Auction, sales halved from Rmb12.1bn ($1.9bn) in 2011 to Rmb6.1bn ($965m) in 2012. The fall at China Guardian was greater, with sales down from Rmb11.2bn ($1.8bn) at the end of 2011 to Rmb5.2bn ($820m) at the end of 2012. The volume of sales was also down at China Guardian, from 29,700 lots in 2011 to around 20,000 in 2012. At Sotheby’s Hong Kong, sales dropped sharply, from $959.2m in 2011 to $592.9m in 2012. Christie’s had the least dramatic fall: sales were down by 16%, from $835.7m in 2011 to $705.4m at the end of last year.

The value of works sold at auction in China had been rising rapidly since 2009—although doubts remain about the accuracy of the mainland Chinese auction houses’ figures. Both the Chinese auction houses attributed the reversal of this upward sales trend to the weaker economic environment in the country in 2012. While booming by Western standards, the world’s second largest economy developed at its slowest rate since 1999, with growth of 7.8%, down from 9.3% in 2011. Meanwhile, the Shanghai Composite index of shares fell 6% in 2012 and hit a four-year low in December. China’s transition of leadership within the ruling Communist Party had an additional dampening effect.

“Certain factors, including political uncertainty, did see buyers press the pause button. This had an effect on the supply to the Asian art market,” says Steven Murphy, the chief executive of Christie’s. However, he adds: “Selling rates remained relatively strong, and the market remains a lot more robust than it was even three years ago.”

A slowdown in China is bad news for the art market because, since 2008, demand from Asia has helped to mask the impact of reduced Western buying. Auction houses and big-name galleries have invested heavily in Hong Kong and mainland China since then.

The art economist Clare McAndrew, who in 2011 was one of the first to quantify China’s position as the largest art and antiques market worldwide, says the slowdown could work in the market’s favour. “A lot of art funds and speculative investors stopped buying in China last year, so it has taken the crazy escalation out of the prices,” she says. “It’s much better for the longevity of [China’s] market for it to cool down and get a bit of breadth [in terms of its collector base].”

Elsewhere, the Mei Moses World All Art Index, which tracks auction resales worldwide, fell 3.28% in 2012. At Sotheby’s, where auction sales worldwide fell from $4.9bn to $4.4bn, the market in the UK fell 20% (from $1.5bn to $1.2bn) and sales in continental Europe fell 11% (from $526.9m to $466.9m). Christie’s worldwide auction sales were up 7% to $5.3bn, but sales in Paris fell 11%.

Brighter spots included the US, where sales at the leading auction houses grew from a combined $3.6bn to $4.3bn (helped by record sales at the prime end of the market). Christie’s lower-end branch in London’s South Kensington, in which the firm is investing heavily, reported a 20% increase in sales to $223.1m in 2012, after a 16% rise in 2011. There were modest gains for the European auctioneer Dorotheum: its total auction revenue for 2012 was €152m, up from €144m.

The figures exclude private sales, a growing area for auction houses.