EB-5 Agencies have been operating in Mainland China since the United States started the Employment-Based Fifth Preference (EB-5) Visa Program through enactment of the Immigration Act of 1990. A few of these EB-5 Agencies existed previously as consulting firms for high net-worth individuals (HNWI) seeking investment opportunities overseas. Others Agencies assisted Chinese students to find educational opportunities in foreign countries. Under the EB-5 Visa Program, the U.S. federal government provides opportunities to facilitate immigration to, and acquire citizenship in the United States. The program is designed specifically to attract foreign investment to the U.S. economy. One of the essential qualifications for participation in the program is a minimum investment of $1 million in a U.S. commercial enterprise. i That project might be a new venture or an opportunity to rebuild a business that is struggling or about to close. The only exception to the million dollar investment is that a minimum of $500,000 is required from an individual investor if the project is located in what are known as Targeted Employment Areas for them to acquire the EB-5 visa which grants them the US Green Cards. This enables foreign investors to immigrate to the US and acquire citizenship.ii Most Chinese are interested in investing no more than $500,000.
When the program was originally introduced, there was an influx of foreign investors who wanted to immigrate to the U.S. – many more than the U.S. government had anticipated. This forced the United States Citizenship and Immigration Services (USCIS) to establish limitation quotas in order to control the number of immigrants who would be allowed to enter. As with most immigration quotas, the limits were established by country and by year. However, things changed in 1998 when the U.S. began to feel the impact of the massive outsourcing of essential industries in what became known as “The Brain Drain.” The USCIS altered its EB-5 requirements to make it easier for more foreign investors to direct capital back into the U.S. in order to create more jobs and to help revive the economy. This has been less widely known as “The Brain Gain.” At that time, many immigration Agencies in Mainland China began offering their services to assist interested Chinese citizens to move to the U.S. as EB-5 investors.
Since then, many more EB-5 Agencies have been formed to accommodate the growing number of qualified Chinese who have become interested in moving to the U.S. The EB-5 business has thrived as more and more HNWI in China have become aware of the EB-5 visa opportunity. EB-5 Agencies have become essential in Mainland China because people don’t have the time or the expertise to go through all the stages of the EB-5 visa application process on their own.
The fact that many Chinese are not fluent in English makes the task even more difficult for them. Therefore, EB-5 Agencies offer an indispensable service because they understand both the EB-5 program and the English language. There are numerous EB-5 Agencies in every province in Mainland China. The market is large thanks to the enormous Chinese population. However, the competition for clients in every province is intense. The larger, more established EB-5 Agencies typically cooperate with several Regional Centers and EB-5 business developers in the United States at the same time. Larger Chinese immigration Agencies tend to engage in other activities and offer a broader range of services rather than being solely focused on the EB-5 business. They may also offer immigration services to Hong Kong and other countries, such as Singapore, Canada, and Australia.
The larger EB-5 Agencies are typically located in major cities like Beijing, Shanghai, and Guangzhou where there is a greater concentration of potential clients. From a reach perspective, these larger Agencies allow for greater exposure to your EB-5 projects. There are some who would recommend associating with larger Agencies because they have a good “relationship” with the Chinese government. “RELATIONSHIP” CAN BE AN AMBIGUOUS TERM. IT IS WISE TO AVOID SOME RELATIONSHIPS THAT COULD BE CONSTRUED AS UNETHICAL. The single most important function of an EB-5 Agency is to facilitate the matching of investors to projects and projects to investors. When a U.S.-based business has a certified EB-5 project, the single most important thing it needs is not investors. It is qualified investors. This is the point of an EB-5 Agency in China: to qualify the investors and search for projects that match their interested investors. This is just a part of the service that they provide for the investor, but it is the essential service that they provide for U.S. Regional Centers. On the surface, at least, presenting your project to EB-5 Agencies is the best way to ensure that it will be matched to qualified investors. EB-5 Agencies in Mainland China should typically review your projects for risk-and-return potentials. It would be wise to have certified analyses available to help them to appreciate the current and potential value of the project. The more they know about and understand your project, the better the chance that the Agency will attempt to match it with their clients. Later, we will discuss how to, and what will, make your project compelling.
CAUTION: Unfortunately, and all too often, the major criteria that EB-5 Agencies in Mainland China use to select Regional Centers and EB-5 business developers is the amount of commission they will receive from them. Some Agencies will simply present their clients to the highest bidder. (Note: These are also often the ones that have a good “relationship” with the Chinese government.) You may find your integrity level tested many times when dealing with some Chinese Agencies. Do not fall prey to those who will tempt you to cross legal, ethical, or moral lines. It is one thing to negotiate. It is quite another to do what is illegal, unethical, or not in the best interest of your own business in order to be introduced to the clients of an EB-5 Agency.
I have long been an admirer of the Chinese culture and their people, finding them to be honest and extremely honorable. However, as in all walks of life, and among various homogeneous populations, a few “bad apples” invariably exist. And, when you factor in the amount of money that the EB-5 process involves, it is very easy to see the potential abuse and less than honorable behavior that can arise. For our book to be useful, it must point out where in the EB-5 process abuses like these can occur. Therefore, any references to nefarious behaviors or deceitful, underhanded practices refer directly to the limited, singular behavior of a few "bad apples" and NOT to the Chinese people as a whole. It seems obvious, but I thought it was important to clarify the purpose of our illuminating where potential abuses can occur. My caution here is that one should exercise care in every business deal. Try to know as much as you can about the Chinese Business Law before you go to China. I will share more about the Chinese Business Law in a later chapter. It’s your business. It’s your reputation that is at stake. And your company is liable to the U.S. government if something is done amiss.