Is the Chinese Dream an EB-5 Visa?
Dream chasing is a popular topic in China these days. Thomas Friedman sparked the debate last October when he wrote a column titled, China Needs Its Own Dream. More recently, The Economist and CNN have also taken a gaze into the crystal ball to interpret China's dream.
Chinese leader Xi Jinping, has loudly adopted the slogan "Chinese dream" while keeping quiet on the details of what that dream might be. Meanwhile, the American dream continues to be peddled in China's mainstream culture and media. With foresight, the United States can benefit from this trend.
Today, more Chinese nationals than ever before are trying to live their dreams, not within the borders of China, but by gaining permanent residency status in the United States through investment and job creation. In fact, according to the Hurun Wealth Report 2012, more than 16 percent of China's millionaires have already emigrated or submitted immigration applications, while 44 percent are planning to do so.
The Immigrant Investor Pilot Program (the EB-5 visa) was created by the Immigration Act of 1990 to stimulate growth by attracting foreign direct investment and creating jobs in America. To qualify for a visa, individuals must invest US$ 1 million or US$ 500,000 in a Target Employment Area which is a rural or high-unemployment area. Additionally, this investment must create and sustain at least 10 jobs on American soil.
Demand for the visa has fueled growth in third-party managed investment vehicles known as Regional Centers which are both privately and publicly run. To illustrate how quickly the EB-5 program has grown in the United States, the number of Regional Centers has increased from around a dozen in 2007 to more than 250 today, including at least one in every state.
While the public profile of the program has been marred by a small number of high-profile, soap-opera-like scams, the difficulties faced by applicants are in fact more mundane: identifying profitable investment projects and creating 10 jobs. After a two-year waiting period, if an investment project fails to create 10 jobs, the foreign investor risks losing their investment and permanent residency in the United States.
Last year, the U.S. Citizenship and Immigration Services hired half a dozen economists to help evaluate the job-production claims, but many believe this added scrutiny has created a bottleneck in the approval process. The Association to Invest in the USA, which advocates on behalf of Regional Centers and industry service providers, recently noted a backlog of nearly 6,000 EB-5 petitions which are currently held up. At the low-end, assuming US$ 500,000 per investment, that's potential for nearly US$ 3 billion and 60,000 American jobs.
Finding information about the number of deals in the pipeline is challenging. It has been reported that American businesses raised more than US$ 1.8 billion through the program in the fiscal year ended September 30, and over 7,500 would-be immigrants were issued visas. Interestingly, 80 percent of them were Chinese, a dynamic shift from the mere 25 percent just four years prior.
Time will tell how China defines its dream, whether it creates one of its own or simply adopts the American dream along with an American home. For now, Chinese investment in the United States can help boost the economy and put Americans to work. If it can stick to its founding principles and map out a clear long-term vision, the EB-5 program shows promise in helping both Chinese and Americans realize their dreams of successful and healthy local economies.
Justin Knapp is the Director of Ogilvy Public Relations, China Outbound Practice in Beijing, China. Follow him on Twitter @goodallfocus. Dan Redford is Director of China Operations of FirstPathway Partners, an EB5 investment immigration firm. You can follow his blog at danredford.com.
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