Thursday, July 23, 2015

Report from China:Dramatic changes in the Chinese EB-5 marketplace

The EB-5 Immigrant Investor Regional Center Program is facing an expiration date at the end of September, undergoing potential legislation change in Congress and also experiencing dramatic market changes in China resulting in an EB-5 market like we have never seen before.  The new proposed legislation is already impacting the investors market with potential major change to the program such as the $800,000 investment minimum and required 7 year tax-return records. Investors concerned with the potential changes are investing before legislation change to lock themselves in to the $500,000 investment level. Increased investment and stricter sources of income will directly impact the investors’ marketplace and speculation is already impacting the investor's decision making.

Recent news of the $3 Trillion dollars lost in the Chinese Stock Market Crash has made worldwide news and also influences EB-5 investors who may have lost millions of dollars in the crash. Some potential EB-5 investors may have their money wrapped up in stocks until they decide to emigrate or select a specific project. Now their investments may be lost forever. A 30 percent crash has also scared other investors to think about alternative type of investments such as the investments in the United States. The crash has shaken the entire country and we will continue to monitor how this will directly affect the EB-5 marketplace. Another impact on the Chinese market is the tighter controls of currency exchanges. The slowing down of outbound money wires is especially true for EB-5 investments. This is another regulation slowing down the EB-5 investment process, which is already a slow investment process.

The Investors market is very crowded with more EB-5 projects than ever in China. The popularity of EB-5 is at an all-time high and US projects must be very competitive to attract investors. Many projects with limited selling points and not properly structured will not find EB-5 capital. Real estate continues to be the most popular type of projects. Also, smaller projects (under 40 investors) continue to be popular between investors and immigration professionals.

The Chinese immigration industry is also changing dramatically. Guangdong Province is opening its doors for exit and entry services, more new kids on the block are showing up.  Lawyers, wealth managers and private banks around China are exploring EB-5 business with US entities. Fees are constantly increasing due to the competitiveness of EB-5 regional centers and developers. Chinese immigration professionals and companies are also forming super alliances, such as the Win Fund Investment Group Ltd., and Chinese Immigration Group Co. Ltd., which will have a great potential impact for EB-5 project developers who are seeking the right agents in China.  In the same time, Chinese eCommerce companies are also setting up Internet platforms to recruit potential investors by charging investors only $1 service fees.   The Chinese marketplace is rapidly changing and hard to navigate. The next few months will have serious impact on the long-term future of the popular EB-5 program.

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