A bid of 85,000 yuan ($13,336) at a rare books auction in Beijing early this month won Shanghai collector Tian Yu the first volume of The Ten Bamboo Studio Letter Paper. The four volumes featuring color woodcuts of flowers, trees, birds, animals and the four treasures of the study (ink sticks, ink stones, writing brushes and paper) were published by the Chinese historian Zheng Zhenduo and writer Lu Xun in the 1930s. Although the books are not that old, they are extremely valuable as only 200 copies were printed. The British Museum included the books in its collection in 1984.

With this volume Tian now has a complete set of the books - he had bought the other three volumes from a Japanese dealer. The total cost of the books was nearly 400,000 yuan but Tian expects the books to be worth double that within two years.

While many financially astute investors have been active dealing in porcelain, antique paintings and calligraphy, the largely ignored rare books sector in the art market has attracted a growing number of investors over the past few years. While rarity is the important ingredient for a collector, the age of a book is also important.

The rare book market includes antique books, old manuscripts, art books and the letters of famous people. Prices for these items range from 1,000 yuan to 10 million yuan.

Not in a library

Ordinary city office worker Tian Yu became fascinated by rare books 19 years ago when he was a college student. "This was inspired by several writers I admired back then. They had a hobby, collecting rare books and they shared some of their stories about this in newspaper columns. I was curious and wanted to find out more about what they read in those books," the 40-year-old recalled.

But given his limited purchasing power Tian could only afford to buy a 15-yuan secondhand book which was a commentary on the stories behind the poetry of Huang Zunxian, a late Qing Dynasty (1644-1911) writer and poet. This was the first book of his collection. "The book's contents cannot be found in libraries and even today cannot be obtained in full on the Internet. I felt really excited at the purchase and at that moment seriously began collecting rare and antique books."

Now the marketing manager with a State-run company, Tian earns nearly 20,000 yuan a month but he started his career on a monthly salary of 2,000 yuan. "The money I earned then was mostly spent on two things: my meals and my books."

At home he now has a collection of more than 2,000 old and rare books. It took him until 2005 before he could get himself to let go of some of the less favored books in his collection so he could afford to buy other treasures. "I used to buy most of my books at the Shanghai Secondhand Bookstore. But after 2004 there was not a good selection there as the number of auction houses in Shanghai began to grow rapidly. Old and rare books fetched much better prices at auctions so they almost completely disappeared from the bookstore. In the meantime, the financial demands rose steeply if I wanted to continue with my hobby," he said.

While Tian surrendered part of his collection to maintain his hobby in a changing market, 46-year-old Lin San was unwilling to sell any of his collection and chose, instead, to cut back on his purchases. "After 2007 I almost stopped buying books. The only exceptions were a few books that I thought were remarkable. The prices for books have gone beyond my pocket. Some of the books in my collection have increased 10 times in value. But I don't want to turn my interest into a financial investment," Lin said.

Lin was born into a literary family in Shanghai and was deeply influenced by his aunt who is an artist. He started his book collection more than two decades ago. "My main focus back then was antique books about my parents' hometown Hangzhou. It's hard to explain why I'm passionate about collecting books. Maybe it's simply because of their rarity. Most of the books I collect cannot be found in libraries."

A profitable interest

One of the characters of Shanghai's rare book trade is "Lao" Ge and the 60-something man began collecting at the end of the Cultural Revolution (1966-76). "My home was very close to Fuzhou Road back then, a street famous for its bookstores. Many people back then shared a passion for books and reading. I'm very involved with literature," Ge said.

In the late 1990s when Ge's home was relocated, he decided to sell part of his collections to raise money for a better apartment. "That was the important reason. As well, selling some of the books made the move easier for me. I had around 10,000 books in my collection then. Alas my son didn't inherit my interest in books," the Shanghainese said sadly.

In 2005 after his retirement Ge opened a secondhand bookstore on Fuzhou Road, selling books from his own collection. "Of course I kept my favorites at home. The bookstore doesn't generate a lot of profit. Apart from paying the rent I make around 4,000 yuan a month. But more importantly the store helps connect me with other book fans and we can exchange our experiences and views. It helps kill time for me as a retiree," he said.

Tian Yu is a frequent visitor to Ge's store. While only occasionally buying a few books from him, Tian and Ge talk about rare book collecting, the trends in auctions, real estate policies and even the macro economy of the country. "The rare book market is affected by the overall economic environment, like the property sector. Although we don't want to make a fortune out of our collections, we want to see their value at least steady in the market. That's part of the fun of our hobby," Yu said.

While Ge turned his interest into a small business, others have moved from being collectors to being investors. Refusing to reveal his full name, Wang, a Shanghai civil servant in his early 40s, has sold most of his book collection at auctions in the past three years.

"Things have changed dramatically over the past few years. Before 2009 most of the bidders at auctions were collectors. For them the priority was that they appreciated certain books. After that they would consider the potential that these books might appreciate in value in the future. But since 2009 most of the bidders at auctions have been investors. They don't have special feelings for any books. Their only concern is if the market price of a particular book will rise quickly," said Guo Ming, the deputy manager of the Rare Book Department at the Shanghai International Commodity Auction Company. "Some of these investors are making blunders. They buy a book at a spring auction and hope to sell it at a better price at the fall auction in the same year. Those with more patience wait for one or two years."

According to Guo, real collectors rarely appear at auctions these days mainly because they are looking for specific qualities or titles for their collections. But books of this quality have increased nearly 10 times in price in the past few years. "Even though they might be financially capable of buying, psychologically they are fighting it. Just imagine - a book that a few years ago cost 50,000 yuan now costs 500,000 yuan," Guo said.

Ups and downs

The rare book market in Shanghai underwent especially strong growth from 2008 to 2010 but suffered a sudden downturn this year. "The average knock-down price this year fell nearly 30 percent year-on-year. The drop in the total turnover was even more obvious," said Guo Ming.

An industry insider, who asked to be anonymous, said the booming market in the past few years was largely the result of the involvement of a businessman from Zhejiang Province. "He spent at least 200 million yuan buying rare books from 2008 to 2010. All the auctions he attended ended up as great successes. After the fall auction last year, however, he withdrew from the rare book market and began collecting antique paintings and calligraphy. The general rare book market was too small for him so he is looking for bigger profits," the source said.

Guo Ming said the rare book market was much simpler than the markets for antique paintings and calligraphy where fakes are common and many investors actually don't care if the works are authentic as long as they have the potential to be sold for a profit. There are very few counterfeit antique or rare books.

"If someone managed to obtain a piece of paper, say from the Ming Dynasty (1368-1644), counterfeiters would think of using it to fake a painting or calligraphy which have a better chance of being sold for a high price. The craft of book printing in the past was very different from today, and anyone with experience can easily tell if a book has been forged. Besides, antique and rare books are likely to have been mentioned in other historical references so a counterfeit would have to be nearly perfect in every way. It is easy for a fake to be discovered," Guo said.

There's no official authentication center for antique or rare books in the city but auction houses usually employ experts who can assess the books. Yu Songtao, of the Rare Book Department at the Shanghai Duoyun Xuan Artwork Auction Company, suggested investors study how to examine works of particular periods and learn about paper quality and printing techniques. "It takes time to master the skills - these cannot be mastered in a few days," Yu said.

Tian Yu said it was not difficult for him or his collector friends to tell if a book was a fake given that most of them have had more than a decade of experience in the field. "The more you see, the better you come to learn about the details. It's very natural."

But one section of the rare books market that has had trouble with forgeries is the sector dealing with letters from famous people. "At least 90 percent of all these letters auctioned in Shanghai are fake. At some smaller auction houses, all the letters of famous people that they offer are counterfeit," said one industry insider surnamed Chen. The letters were usually written by famous people to their family members or friends so it's hard to assess their provenance.

"For instance a painting by Zhang Daqian, one of the most prominent Chinese painters of the 20th century, might be priced at more than 10 million yuan at an auction. But the price for a letter written by him might cost just over 100,000 yuan. Some brave investors might think it would not be a great loss if the letter was indeed counterfeit but that they might be able to make a fortune sometime in the future if it happened to be genuine," Chen said.

A chapter of changes

In 1994 when the art auction market in China began to pick up, rare books were already in the catalogues. In the fall of that year, an auction of rare books held by the China Guardian Auctions Company marked the official beginning of the rare book auction market in the country.

The market for rare books developed steadily in the following years until there was a rapid expansion in 2001 and 2002. At an auction held by the Sungari International Auction Company in May 2001, The Calligraphy Version of Five Classics by Zheng Banqiao, a famous Chinese painter, was sold for a record 5.50 million yuan. Just a few months later in April 2002 that record was broken by The Hua-yen (The Avatamsaka Sutra) Scroll 65, which was auctioned for $HK8.87 million ($1.14 million). In November 2002 the China Guardian Auctions Company auctioned Qian Jingtang's Collection of Letters of Correspondence Among Ming Celebrities for 9.90 million yuan setting another record.

Rare book collecting was attracting attention. In the years following 2002 market prices for rare books saw substantial increases. High-end books were auctioned for millions of yuan while the prices for middle-rated volumes ranged from 100,000 yuan to 1 million yuan.

The global financial crisis in 2008 struck a blow to the art market. While the general picture was gloomy, rare books, however, saw their prices rise a little in non-auction sales while the auction market for rare books sustained steady growth.

In 2010 when the art market walked out of the shadow of the financial crisis, the rare book auction market became increasingly active. The spring auction of the China Guardian Auctions Company was worth 45.79 million yuan; the spring auction for the Poly International Auction Company fetched 30.50 million yuan; and the fall auction of the Beijing Hanhai Auction Company raised 12.90 million yuan.

The spring of 2011 saw several new price records being set including the rare book Yuan Dynasty Handwritten Copy of Policies of the Eastern and Western Han Dynasties in Twelve Volumes which fetched 48.30 million yuan at auction, reportedly a world record for a rare Chinese book.