Wednesday, December 2, 2015

Warning Issued by Chinese Government to EB-5 Investors

November 1, 2010 by Michael Gibson  
Filed under EB-5 Visa News

maoAs many EB-5 practitioners are already aware, the Chinese government has issued warnings to potential EB-5 investors about risks associated with the program. The following document is an English translation from the Chinese-language news site, SINA net:

China Public Security Bureau Points Out Huge Risk of US EB-5 Projects

Recently, at a meeting of “Exit and Entry Service Association” held by the Division of Exit and Entry Administration Department of Public Security of Canton Province, the speaker from the division relayed to the attendees the instructions of the Ministry of Public Security of the People’s Republic of China and pointed out the huge risk of US EB-5 Projects. According to the rule of The Ministry of Public Security, all agencies engaged in EB-5 projects must supply the legal documents signed with a foreign partner (those documents need to be notarized by foreign bodies). Agents should tell the investors the risks involved with EB-5 investment. Some immigration professionals state clearly that people should be aware of the two risks, “investing fund” and “conditional green card,” even though the EB-5 program is strongly accepted by immigration agencies and applicants.

Current Status: EB-5 Applicants Increased Dramatically in Mainland China

The EB-5 Program was first introduced to China at the end of 2005. With increasing trade between China and the US, more and more Chinese entrepreneurs need the green card to go to the US for business purposes, expanding their business in the US, as well as sending their kids to study in US. The EB-5 Investment Immigration Program has been expanded since 2007.  LiJuan Zhou, CEO of the overseas branch of HONGHAI, said that  there are now way more Chinese EB-5 applicants than Korean applicants according to the latest statistic report from OCT–2008 to Sept, 2009–by USCIS. 1795 Chinese from mainland China applied for EB-5 besides 142 Chinese from Taiwan. Sheng Liu, General Manager of the US Project Division of Fei Yang Group, said that USCIS issued more than 1800 green cards to investors in 2009, almost double those issued in 2008.  Chinese applicants obtained one fifth of the total green cards, a little bit less than Korean applicants, but the number of Chinese investors who applied for the green card is increasing the most.

The EB-5 marketing promotion in China also expanded rapidly. For example, in 2005, there was only one EB-5 project being promoted in Guang Zhou. At the end of 2009, however, there were more than 20 EB-5 projects introduced with different scales–some projects are big and some are small, such as a restaurant project.

Analysis:  EB-5 “Flexible Immigration Requirement”

Senior Immigration Consultant of GuoFeng LLC, ShaoHeng Lin, indicates the reason why the EB-5 program wins the popularity among the immigration agencies and investors in the last two years is the EB-5 “ Flexible Immigration Requirement.”
The EB-5 “Flexible Immigration Requirement” gives you the flexibility to do what you want in the USA: No degree requirement, any age, and no entrepreneur experience requirement. Any person who reaches 21 years old and shows a source of $500,000 legally (business income, stock gain, house sale, house loan, gifts, etc.) can apply.

In Canton, A lot of people can easily meet the EB-5 requirement. For instance, a kid who wants to study in US, as long as he is 21 years old and has a $500,000 investment fund from his parents can apply for it and come back to China with a green card after graduation.

The whole family can get the green card if one of the households applies for EB-5. For many Chinese individuals and families, it’s an easy and fast way to get a green card. It’s also very attractive to the immigration agency. They can turn around cash in a much shorter time since the EB-5 program process only take about 3-8 months.

Risks: “Investment Fund” and “Green Card” are two major risks

According to the EB-5 program, foreign immigration applicants must invest in a commercial enterprise that will benefit the US economy and create 10 full-time jobs in order to get a “conditional green card” for a two year period. Prior to the two-year anniversary of the granting, the EB-5 applicants must submit supporting documents stating they have invested or are still in the process of investing to remove the “condition” and become permanent US residents. 2010 is the first “mature year” for EB-5 investors’ “5 year terms.” Whether the EB-5 investors can meet these two requirements is a very sensitive topic. However, recently the Ministry of Public Security has warned potential immigration applicants that EB-5 projects promoted by some of the immigration agencies belong to private equity activity and have huge risks.

YouWen Zhen, General Manager of GuoHeLi investment consulting LLC in Shen Zheng, pointed out two huge risks:

First, Investing Fund Risk: The investors need to fund the project first before getting the visa, and EB-5 projects are not financially guaranteed by the US government, The investing fund cannot be withdrawn within 5 years.  The investment must be truly at risk.  From the EB-5 procedure, the applicants must fund $500,000, a huge amount once they start to apply through the agency. While Canada’s investor immigration funding is backed up by the Canadian government, USCIS asks all regional centers to clearly state in their contract with EB-5 investors that EB-5 investment must be “at risk” and there can be no mention of redemption rights or guarantees. However, some of the immigration agencies and American personnel ignore this rule and promote EB-5 illegally, as private equity.

Second, Green Card Risk: The EB-5 applicants cannot control and manage the investing process themselves. If the investment failed and did not create 10 jobs during the two years, their green card will be canceled. At the beginning, the applicants and family only get a “conditional green card.” There is a long way to go to get the permanent green card; in case the investment fails, they not only lose the green card, but also the investment fund. In China, there are EB-5 investors who got “conditional green cards,” but as for today, none of them have successfully changed to I-829. We encourage people to do their own due diligence, especially studying the mutual fund companies who actually run the EB-5 projects before they choose to invest in the project.

Related posts:

  1. China Daily story on potential fraud for Chinese EB-5 visa investors using unscrupulous agents “More wealthy Chinese go for Green Card”
  2. MSU Grad Seeks Chinese EB-5 Investors
  3. EB-5 immigrant investor visa applicants by country annual report issued by the National Visa Center
  4. Chinese Investors: Big Business in NY
  5. Maryland Live! Targets Chinese EB-5 Investors

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