Wednesday, June 22, 2016

Report from China: EB-5 reality check

(Brian Su, Artisan Business Group) I finally completed my 13-day EB-5 investment fact finding trip to China. The trip help us have a better understanding of the latest Chinese investor market conditions and trends. The following are my random observations and thoughts, and hopefully help you to determine your EB-5 regional center's next market strategies.

Right before my departure to Beijing, SEC released its complaint against a cancer treatment center project in Southern California. I knew that I would be discussing with migration agents on EB-5 program's integrity and safety issues.  During the intensive trip, I had great opportunities of meeting with leading migration agents such as Well Trend CEO Larry Wang,  Worldway CEO Dr. Winner Xing, KBL Group VP Shirley Liu and a dozen of regional migration agency executives in Beijing, Shanghai, Shenzhen, Guangzhou, and Shandong Province. I was also able to meet with executives with wealth management companies, banks, accounting firms, and online brokers that have been working with EB-5 regional center program. Our discussions focused on the current Chinese market trends and future of the EB-5 program. It is obvious that Chinese investors are still showing strong interest in the US investment program, however, retrogression and EB-5 scandals have troubled migration agents and investors. In regard to the long waiting time on I-526 approval and retrogression, many migration agents have not been honest with clients because they are afraid of losing them. On the other hand, they are also afraid of potential lawsuit since they are not telling the truth. It is recently reported that an EB-5 investor filed a lawsuit against a Beijing migration agent, the trial was covered by TV news and widely watched on Chinese social media.  

Though Chinese market is becoming more competitive and throat-cutting, many Chinese companies continue to be flooding into the market.  Guangdong Province and the Free Trade Zone in Pudong Shanghai now have an open market policy and anyone can easily register an emigration service company.  In the US market,  more Chinese real estate developers (Greenland, Wanda, Landsea, Beijing Construction & Engineering, etc), banks (Bank of China), even Chinese state-owned insurance companies are coming to get involved with EB-5 project development and finance. It is reported that a Chinese state owned insurance company is providing insurance coverage for investors investments.  We also see more and more large US developers are working very closely with Chinese partners to develop high profile projects in New York City, San Francisco, Los Angeles and Chicago. These mega-size projects in major cities have drawn more than half of EB-5 visas, and they are forcing the majority of EB-5 projects in smaller cities and rural areas out of investors market in China.  


Thanks to former government officials (such as retired governors, US ambassador to China, congressman and other politicians) and their frequent appearances in front of Chinese investors, well supported and financed large projects in NYC and Los Angeles are more glamorous and are attracting much more attentions than any projects in smaller cities, it is definitely putting many projects in disadvantaged positions or simply force them out of investor market. Chinese investors almost have no incentives to invest in smaller projects and/or projects in less known cities and areas.  The top 5 Chinese migration agencies are all heavily promoting multiple luxury condo projects in NYC or government supported infrastructure projects such as tollway or railway.  In addition to EB-5 regional center projects, we see small scale direct EB-5 investment projects are disappearing from the Chinese market this year, they just cannot compete and they cannot offer competitive commissions to agents.

930 is coming up, the uncertainties around EB-5 regional center program continue to haunt everyone in the EB-5 world.  No one knows what would happen this Fall. Everyone is trying to figure out if the program would get a straight extension.  For some investors, word of EB-5 is like a poison pill that no one wants to touch. European real estate or Caribbean Passport programs might be a better fit for them.

However no matter what happens in both China and the US, the Chinese demand for outbound investments will be increasingly high, as Chinese real estate bubble continue to produce tens of thousands qualified investors, Chinese will dominate EB-5 investment market for next few years. 

At the very end of my China trip, I was really feeling troubled with the current EB-5 regional center program and it has to be reformed.

Facing ever-changing market, nearly 30 migration professionals from China, Canada and the UK will be gathering to attend our 2016 Executive Training Program and US China Investment Forum next week, we will engage further discussions and develop new working strategies.

To learn more about EB-5 investments from China, please join us at 2016 US China Investment Chicago Forum on June 30!

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