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"When a silkworm produces silk, it would never dream there is a Silk Road," the artist, architect and provocateur Ai Weiwei said in an interview last year. Quoting a verse written by his father, the poet Ai Qing, he was reflecting on the surprising growth of Caochangdi, the burgeoning urban village and arts community perched on the northeastern outskirts of Beijing. Not even someone as shrewd as Ai Weiwei could have imagined the chain of events he would help to set into motion when he moved to Caochangdi in 2000, ultimately transforming the quiet neighborhood into one of the city’s creative hubs. And in Beijing, where a top-down approach to urban planning and economic reform sometimes leaves people guessing about their future, the image of an unwitting silkworm seems particularly apt.

Drawn to the area because of its undeveloped land, Ai came to Caochangdi (which means "grasslands") to build his studio and the China Art Archives & Warehouse, one of Beijing’s first artist-run exhibition spaces. Since then, the development of the dusty hamlet has been nothing short of stunning. Not long ago, taxi drivers hesitated to venture into this uncharted territory just beyond the Fifth Ring Road, and a visit to one of the few art spaces here required multiple phone calls for directions. Today, a barrage of dual-language signs welcomes visitors to Caochangdi Cultural Industry and Art District, pointing the way to the more than 20 galleries that have set up shop alongside the artists’ studios, hole-in-the-wall restaurants and produce stands that dot the village’s narrow lanes.

Caochangdi’s expansion is directly linked to the meteoric rise of the Chinese contemporary-art market that took place from 2005 to 2008. Artists suddenly had more money to build large and sometimes lavish studios in the area, while galleries from China and abroad — priced out of or turned off by the city’s other art districts — began to open up with increasing frequency, hopeful that these new spaces would pay for themselves in sales. The Chinese art market was among the most speculative and inflated until the downturn of 2008, and confidence in Chinese contemporary art as a quick, high-return investment has fallen, though many people feel that the market has simply undergone a natural correction.

Unlike the more self-contained, sanitized and tourist friendly 798 Art District, which is located in a former factory site about 10 minutes away by cab, Caochangdi is still a loose sprawl of unnamed and sometimes unpaved roads, crisscrossed by clotheslines and studded with the mounds of gravel that accompany the area’s many construction sites. Yet it is precisely this unique patchwork, plus a mix of residents that includes foreign and Chinese art dealers, primarily but not exclusively handling Chinese art, as well as villagers, artists, day laborers and taxi drivers, that has fostered a sense of community in Caochangdi. It’s a place where artists stop by each other’s studios for a beer and end up playing cards all night, where you can buy a pancake on the street for a quarter and then see some of the most daring and innovative exhibitions in China. In the past several years, many of the city’s most important art spaces have set up operations here, including Boers-Li Gallery, Chambers Fine Art, Galerie Urs Meile, Platform China, Pékin Fine Arts, ShanghART and Three Shadows Photography Art Centre, making the village a mandatory destination for arts professionals visiting the city and for local collectors and enthusiasts. Some European artists have arrived, including Not Vital, who just completed a lavish new studio compound. China’s People’s Daily recently called the district "one of the nation’s artistic hotbeds."

But despite its local prominence and international visibility, rumors have been circulating in recent months that much of Caochangdi (along with other artist villages and studio compounds in northeast Beijing) are being considered for demolition to make way for new government projects and business development — including, oddly enough, a "cultural district." Last fall, when I asked artists and dealers living and working in the area abut these rumors, I heard conflicting predictions about what the future holds. According to speakers, plans may or may not include the leveling of architecturally significant buildings designed by Ai — low, rectilinear structures in gray brick that have become the area’s signature — including galleries and the studios of such well-known artists as He Yunchang (also called A Chang), Li Songsong and Wang Qingsong. The demolition could happen immediately, since a land assessor had already come to measure some of the spaces and determine the exact size of the lots. Then again, it might start within the next few years, or not at all. In other words, many people either were not privy to information that would directly affect them or wondered if a decision made today might be reversed tomorrow.

Change is nothing new in Cao-changdi, a neighborhood which has been redefined continually over the past 50 years by a series of political agendas and economic shifts. Once the site of imperial graves and gardens, it was transformed into a farming village sometime during the 1960s — changes outlined in Caochangdi: Beijing Inside Out, a fascinating new book by the architects Robert Mangurian and Mary-Ann Ray. During Deng Xiaopings economic reforms of the late 1970s, farmers realized they could make more money as landlords and began leasing their tracts to private companies and, in the past decade, to artists and galleries. The buildings that now stand on these leased properties, however, may not be legal, because they were built without proper permits and authorizations, and the farmers can always sell the land to developers who have other plans for its use.

Amid the rising tide of hearsay and innuendo within the art community, I found one person who spoke definitively about the situation. "First you need to understand that the general policy announcement from which the rumors started is a prohousing policy," explained Meg Maggio, the founder of Pékin Fine Arts and a longtime Beijing resident. The idea, she said, is "to get people living on the city outskirts out of makeshift ping fang [literally "flat houses," often one-story shanties] and into newly constructed lou fang [multistory] buildings. That is a great housing program of the Beijing city government and will improve many people’s lives. We are told by our developer and Ai Weiwei that while there was initial concern that this new prohousing policy would affect us, it is now clear that it will not."

Meanwhile, just north of Cao-changdi in the Beigao studio complex, the mood this past fall was less optimistic. The artist Liu Ding told me that because of plans to build a theater and other construction projects, his studio and others there, which have been leased on a long-term basis and renovated, are likely to be torn down within the next two years. In nearby Changdian village, the Taiwanese artist Peng Hung-Chih finished construction on his studio recently only to learn that he might not get to use it for long. "There are still a lot of rumors," said Peng. "I heard that the farmers want reasonable compensation [from the government for the land]. If they get that, the destruction will go on. I think my problem is not over yet."

Peng, it turns out, was right. By mid-November, the plan to destroy the studios was proceeding rapidly. Residents were given three days to move out, but they hired a lawyer and were trying to negotiate with the landlord for more time and for compensation. At press time it was uncertain how much respite they had been granted — the first eviction deadline had passed and a new one had not yet been set. Although there was already snow on the ground, heat had been cut and running water was intermittent. Artists may be reimbursed the rent they paid in advance, but it will be much harder to recoup the money they spent on renovation. For their part, the artists knew that sinking money into property they didn’t own was a gamble, especially considering that if land is deemed desirable for other uses, even long-term leases can be broken.

Because of the lack of clearly established legal guidelines, chaos can arise when disputes between tenants and landlords escalate. In an extreme incident a few months ago, the Caochangdi branch of Seoul’s reputable PKM Gallery was caught up in a bizarre chain of events including the gallery’s landlord, whose divorce proceedings led to a dispute over the income generated by the property. Twenty thugs, allegedly hired by the landlord’s wife, took the gallery by force, stabbing a security guard and occupying the space for several days. When I stopped by shortly afterward, the police had cleared out the gang, but a notice had been posted on the door informing pkm that it must remove its belongings immediately. Although the paper looked official, the gallery director was questioning its validity and the situation was far from being resolved.

The recent confusion about who has the right to rent, to build and to destroy in Caochangdi demonstrates how uneven and minimally regulated development, coupled with shifting or conflicting national, municipal and village agendas, have allowed such districts to thrive but have also made their long-term survival uncertain. At the same time, rumors or no rumors, Caochangdi shows no sign of slowing down. Studios are still being built, and new galleries are launching, including Taikang Top Space (formerly located in the 798 Art District) and C-Space. While silkworms may not dream of the Silk Road or even of an Hermès scarf, they may find that spinning even the most beautiful cocoon may not always insulate them from forces beyond their control.

"The Village that Art Built" originally appeared in the January 2010 issue of Art+Auction. For a complete list of articles from this issue available on ARTINFO, see Art+Auction's January 2010 Table of Contents.