China’s ‘charming towns’ plan turns into a nightmare for investors, amid legal crackdown

Initiative was to dot the countryside with themed villages, like Crayfish Town, Poetry Town, Fairyland Town, and Happy Town

Collapse of a funding company has seen senior executives detained by police, and thousands of investors scrambling for answers

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An artist's impression of the Crayfish Town, created by JC Group. Photo: Handout

Published: 4:00pm, 1 May 2019Updated: 3:35am, 2 May 2019

China’s “thousand charming towns” initiative was supposed to dot the vast countryside with beautiful, liveable and themed villages, carrying names as eclectic and zany as Crayfish Town, Asian Games Town, Poetry Town, Fairyland Town, and Happy Town, which would come complete with a “sex park”.

But last week’s collapse of a private company behind many of these developments has seen dozens of senior executives detained by police and thousands of investors scrambling for answers, desperate to recoup their money. The sudden failure of JC Group, based in the city of Hangzhou in Zhejiang province, marked another bankrupt fundraising programme in China and exposed the huge risks behind the country’s state-led, debt-fuelled development drive.

There are thought to be 3,800 individual investors exposed to JC Group’s collapse, and while no figure has been put on the expected total losses, the minimum threshold for these investments was set at 1 million yuan (US$148,480).

JC Group, which collapsed last week. Photo: Handout

It also brought into sharp focus the so-called “grey rhino” risks which haunt China’s economy. The term refers to big and neglected financial risks, such as the 2008 financial crisis, which are usually telegraphed in advance, but which are not stopped until it is too late.

JC Group, established by businessman Wei Jie in 2008, acted as an agent between local governments eager to raise funds to develop the local economy and affluent Chinese investors searching for high returns.

JC Group signed agreements with local governments to to develop more than 50 charming town projects across the country. Among them was Happy Town, which was to be built in the sleepy riverside town of Yucheng, in the Yangtze River Delta.