It was the summer of 2015 when a Chinese sporting arms race reached West Bromwich Albion.
Four years, one aborted takeover, one completed deal and a relegation later, the Baggies find themselves stranded in the fallout of China’s burst football spending bubble in a state of limbo they so nearly avoided.
Little is known, even among club staff, of Guochuan Lai, the enigmatic ‘new town’ tycoon who bought the club in 2016 with grand plans to exploit the purchase at home.
But there seems no doubt that running Albion has not panned out how Lai envisaged when he clinched a deal to acquire Jeremy Peace’s 88 percent stake.
The active encouragement from Chinese president Xi Jinping for the country’s ambitious businessmen to invest in European football has given way to clear new rules preventing further spending.
Experts claim it leaves Lai and Albion stuck, unable to move forwards, unable to escape.
“He’s stuck between a rock and a hard place,†said Simon Chadwick, professor of sports enterprise at the University of Salford and a leading authority on Chinese investment in sport.
“It’s not worked out for him in the way he would have wanted it to and because of controls on currency movements from China to overseas territories, he hasn’t been able to invest in the club and he can’t take it forward in the way he would want to.
“At the same time he probably overpaid for it so he can’t find a buyer and he’s stuck.
“It’s a case of no way forward, no way back and I feel sorry for the guy.â€
It was all so different in August 2016 when Lai purchased Albion from Peace; both men benefiting from the collapse of a takeover bid 12 months earlier.
Zhonghe Capital, a Chinese investment firm, had agreed to pay Peace around £150 million for his controlling interest, only for the choppy waters of the Chinese economy to wash the deal onto the rocks.
Zhonghe had been the first of several interested buyers to meet with Peace’s advisors, eventually proving the most credible and becoming the preferred buyers.
A deal was agreed and a sizeable portion of the purchase money was deposited with Zhonghe’s lawyers ahead of completion, only for a financial crash to hit.
In June and early-July the Shanghai stock exchange dropped in value by around 30 percent, the Chinese government clamped down on overseas spending in a bid to halt the losses and Zhonghe were unable to get the balance of the purchase price out of the country.
Peace was unconvinced that the impasse could be broken so, with the 2015-16 season looming, he called off the sale. Burned by one failed deal, he engaged London-based financial consultants Smith Square Partners to seek new potential buyers and vet them thoroughly to avoid further frustration.
Peace moved to Jersey, determined to find a buyer for the club he had established in the Premier League, but when another Chinese group made contact early in 2016, he was unsure at first.
By now, though, a lucrative new overseas television deal had convinced him Albion were worth an extra £50 million, and the former city stockbroker was eventually persuaded that this new consortium were serious.
The approach came from Yunyi Investment but seasoned negotiators reported the structure of the deal was unlike anything they had seen before. Proof of funds came from several different firms offering a portion of the asking price with Lai emerging as the biggest single investor.
Yunyi explained the plan was for smaller investors to eventually sell their stake to Lai’s companies, making him the owner of 88 percent of the club.
Peace was eventually convinced that the offer was genuine and credible and, over a series of meetings at The Grosvenor Hotel and the London headquarters of Albion’s solicitors, a deal was agreed for the Lai-backed consortium to take charge.
And Peace, it is understood, attempted one final shrewd move before leaving his role as chairman after 14 years.
The deal to sell was agreed on June 24, 2016 as Britain was digesting the result of the previous day’s referendum on European Union membership.
Peace had long been concerned about the possible effects of Brexit on the pound and had requested payment in US dollars.
His wish could not be met due to the complexities of the deal and, with the value of sterling subsequently dropping amid political uncertainty, those involved estimate he missed out on several million pounds as a result. Peace had his deal and Lai had his club, even if his plans for it were not immediately clear to rank-and-file supporters.
“West Brom were the only club outside of the big three or four that were consistently making money,†said a source close to the deal.
“They were the only smaller team in the Premier League that were consistently making money and that’s why a lot of people had a look.
“That was entirely due to how frugal Jeremy Peace was and the fact that he and Mark Jenkins, the chief executive, ran the club so efficiently.
“That was the main rationale, it was profitable and they felt it was affordable.
“There was an arms-race going on in China at the time and they were trying to buy up as many assets as they could, particularly football-related assets.â€
Lai was one of many wealthy Chinese figures to heed Xi’s clarion call and move himself into the European football market.
The belief among many Chinese football experts was that quenching the president’s thirst for overseas sporting investment would position businessmen favourably for opportunities at home, although we don’t know for sure that was Lai’s motivation.
Lai unveiled plans for a network of eco-towns, complete with Albion and Premier League-branded sports academies, tapping into the government’s dual ambitions of football expansion and cleaner living.
The vision, which has never been realised, seemed fanciful to many Baggies supporters, but not entirely implausible to those familiar with China.
“I can imagine a link to the Premier League and, when it comes to growth in China, they do harness some fairly random ideas that you and I would just expect not to work at all,†said Dr Rob Wilson, a football finance expert at Sheffield Hallam University.
“I can imagine how the newer broadcasting deals would help support the development of those towns and attract people to live in them.
“Whether West Brom has a sufficient allure to them is another question, but that’s because of how we understand that club.
“As far as the Chinese population was concerned they were a Premier League club, and the Premier League is this great thing that embodies everything that is great about football so conceivably you could see that working to a point.â€
Chadwick added: “Something that’s massive on the Chinese policy agenda right now is to improve environmental standards.
“There are more solar panels in China than anywhere else in the world, so there’s a huge drive there to improve air quality, to improve the quality of living and so on and so forth.
“So I think Lai was trying to work with the football and environmental agendas, but real estate is always a very interesting part of Chinese economic activity and a lot of previous investors in football such as the Evergrande company have used their investment in football to get property development contracts from the government.
“Whenever I go to China nobody is talking about environmental towns.
“People do talk about environmental concerns – the environmental issues are real and tangible but as far as West Brom-branded environmental towns that are funded in conjunction with football, you just don’t see that.
“I suspect Lai was being speculative, and I can understand why because it wasn’t a wild idea.
“There was some consistency and coherence to his thinking but I just think he took a flyer that hasn’t really worked out for him so far.â€
If Lai had ambitions to use his role at Albion to his advantage in China, it was not long before events in England began to conspire against him.
Within months of the takeover, the enthusiasm for European football investment within the Chinese government began to wain. And, as the landscape in China changed, just two wins came in the first 11 Premier League games of the 2016-17 season and, while a mid-season upturn brought an impressive, 10th-place finish, Tony Pulis’s men ended the campaign with a winless sequence of nine matches.
Lai and his new lieutenants, chairman John Williams and chief executive Martin Goodman, handed Pulis a new contract in the summer of 2017 despite many supporters and players wanting him out.
By November, Pulis had been sacked and by February 2018 Williams and Goodman had been jettisoned too.
Jenkins, Peace’s trusted right-hand man, was reinstated as CEO but the plunge towards the Championship was too steep to be halted and a chaotic spell under Alan Pardew – in which only three league matches were won and a bonding trip to Barcelona went horribly wrong – sealed Albion’s fate.
Lai found himself with a reality of what would have been his worst nightmare – a football club without the kudos of Premier League status to command respect at home.
He had Jenkins’ experience and prudence back at the helm but not the vision of Peace.
“Jeremy always was the quintessential executive chairman, very hands on with everything, and Mark was able to execute things,†said one source.
“But it was all about Jeremy. He was the strategist who came up with all of the concepts.â€
West Brom looked east for direction but found a chairman who lacked the knowledge to help the club strategically and the ability to back it financially.
A £3.7 million loan, made by the club to parent company WBA Holdings under Peace’s stewardship and inherited by Lai under the terms of the takeover, remains an open sore for smaller shareholders, who own the 12 percent of the club not purchased by Lai.
The debt now stands at £4.1 million with interest continuing to accrue, but the new landscape for Chinese football investments means there is unlikely to be any immediate hope of Lai repaying, much less producing additional funds to help Albion return to the top flight as their Premier League parachute payments begin to shrink.
“Everything has changed in China,†the same source told The Athletic.
“At the time there was that arms race for people to come in and get as many sporting assets as they could.
“There was guidance from the very top. It was China putting their stamp internationally and people seen to be doing this would stand to benefit from various things domestically.
“You would be in line for various different contracts. It was a status symbol.
“That went full circle. I still read the odd article and people say there are Chinese investors interested in this or that and it’s complete bull.
“Those kind of acquisitions can’t happen anymore. They have been outlawed.
“At the time of this deal it was ‘go and do as much as you want’, now it’s very much ‘we don’t want people to be investing in these clubs’.â€
Nor is Lai expected by informed observers to sell his stake in the immediate future.
Promotion this season under Slaven Bilic would solve many of the problems by securing a top-flight revenue stream.
Falling short, however, would lead to more budget cuts next season under an owner with no obvious way out and the spectre of tough government action if he suffers the indignity of selling his shares at a loss.
“Chinese consumers like status and prestige, you don’t invest in failure, and if you’re seen to invest in failure then you lose face,†said Chadwick.
“We all know what face is, but face in Chinese society is much more significant than in British society, so if you’re seen to publicly lose face it reflects really badly on you, your status and your reputation and on your family and friends.
“I think he needs to sell it at a profit for two reasons, firstly because if he doesn’t he will lose face – even if he can sell it for £10 million than he bought it he would save face and be happy.
“But secondly, if he sold at a loss it would imply a net outflow of currency from China, so he will have taken more money out of China than he’s brought in and the Chinese government would not be happy with that.
“Unless West Bromwich Albion get promoted this season he’s going to really struggle unless he can find maybe American investors, or maybe a joint venture with African, South American or Russian investors.
“The only other way out of this for him is if he can somehow demonstrate that his investment in West Bromwich Albion has enabled him to win an infrastructure contract in the UK.
“Potentially his only way out is to link it to other property of infrastructure developments, maybe HS2, and that would then be basis on which he could justify his investment and the Chinese government would agree to release some funds that he could spend on the club.
“He will have lost face because Albion were relegated so now he’s in a really difficult position in the sense that he’s paid a lot of money for something and engaged in a speculative investment that hasn’t paid off.
“It hasn’t paid in terms of environmental towns and property, but also in terms of the revenues and status you would derive from being the owner of a Premier League club.
“So he’s stuck with this asset.â€