Visit the town of Shanghang in south-east China and what first catches the eye is a thicket of giant colourful billboards that advertise everything from fancy villas to wealth management services. The rows of car lots filled with shiny new sedans and sport utility vehicles stand out against the backdrop of lush tea-growing hills and the legendary Purple Mountain.

Just 20 years ago, most people in this part of Fujian province had never even seen a tractor. But today it is home to the exceptionally opulent peasants of nearby Tongkang village, the wary targets of all this modern marketing. How they came upon their wealth is a uniquely Chinese story of luck, greed, corruption, repression and urbanisation in a society where the pace of change in the past 30 years has lifted more people out of poverty than at any time in human history but has left even more behind.

The ancestors of the villagers, who all share the surname “You”, migrated from central China 31 generations ago to settle on the slopes of Purple Mountain, where they grew tea, sweet potatoes and rice and panned for gold in the streams. In the mid-1990s, the state-owned Zijin Mining began blasting and drilling for gold and copper on the upper slopes of the mountain.

Tongkang's village committee was supposedly a shareholder in the company but, although they were able to get temporary jobs as drivers or labourers in the mines, the villagers saw little other benefit and watched helplessly as their water supply became increasingly polluted.

Nine years ago on Saturday, a tailings dam from the mine burst – and washed away most of the houses and crop fields in the village. Although no one died, the villagers lost their homes and livelihoods. Taking their land, the company relocated them to the county seat of Shanghang, where they were clustered into a compound of boxy concrete apartments on the outskirts of town.

The cash compensation they received was not enough to build new homes in the town and Zijin told them it did not have enough cash to pay them the full amount to which they were entitled for their farmland. “Zijin Mining was quite a small company and very poor at that time,” says You Jinlan, a Tongkanger in his 40s sporting a tailored shirt and gold earring. “In fact, it was nearly bankrupt, so it gave us shares instead of a cash settlement.”

The farmers accepted their fate but insisted that the local Communist party committee divide the shares evenly among the villagers instead of holding them on their behalf. “We didn't trust the corrupt local officials, so we forced them to divide the shares up immediately,” says You Facai, a chain-smoking, plainly dressed villager in his late 50s.

In June 2001, each of the 1,068 registered residents received a plain little ledger book with handwritten entries showing they now owned Rmb1,338.85 ($196, £117, €138) worth of equity in the mining company, which had been transformed from a state-owned enterprise into a limited liability company a few years earlier. “We were now landless peasants and we thought those shares were not even as useful as waste paper we'd use to wipe our bottoms,” says You Facai, shaking his head in disgust. “Many of the villagers wanted to sell them for cash immediately but there were no buyers.”

In the first year, around seven families sold their shares for slightly more than face value, according to You Tiancheng, a villager who acted as a broker for neighbours who wanted to sell their stock. He recalls one family of six who sold all their shares for Rmb10,000.