Direct EB-5 Investment Opportunities In The Mainland China Market

Direct EB-5 Investment Opportunities In The Mainland China Market

According to the December 2021 Visa Bulletin released by the Department of State, the cut-off date is current for investors from all countries. This includes investors from Mainland China, with the date moving from November 22, 2015, to current.

The EB-5 program is immensely popular with investors from Mainland China, as evidenced by the years-long visa backlog, which highlights the shortfall between visa demand and visa availability. This backlog had some investors waiting more than 10 years for a visa. However, the cut-off date becoming current could attract new Chinese EB-5 investors, presenting a unique opportunity for U.S. business leaders to access capital from this segment of the EB-5 market.

Additionally, a major disruption in the EB-5 market occurred in June 2021 when a judge declared the 2019 changes to the EB-5 program invalid. Consequently, only direct EB-5 investment is possible now, but at the pre-2019 amounts of $1 million or $500,00 for investments made in targeted employment areas (TEAs). This makes direct EB-5 investment even more tempting for Chinese investors.

However, because Congress will probably review the EB-5 program and raise investment amounts again, and possibly reauthorize the regional center program, the current opportunity is not without risk for investors.
Mainland China’s Cut-Off Date: The Causes And Implications

The main cause of the cut-off date for Mainland China becoming current is the sunset of the regional center program on June 30, 2021. Most investors from Mainland China make regional center investments. Table V (Part 3) of the Report of the Visa Office 2020, which lists the number of EB-5 visas issued by country in the 2020 fiscal year, shows that around 92% of the 1,564 EB-5 visas issued to Chinese investors were based on regional center investments. Because applications based on regional center investments are not currently being processed, the bulk of the EB-5 visas assigned to investors from Mainland China is available for those who have made direct EB-5 investments.

While it may seem that the Chinese EB-5 market is open for business through direct EB-5 investment, the uncertainty surrounding the reauthorization of the regional center program has several implications. If the regional center program is renewed, or legislation is passed to preserve the applications of investors who invested through regional centers and whose I-526 petitions were approved before June 30, 2021, Mainland China’s cut-off date returns to November 22, 2015. In this scenario, new investors could fall to the back of the visa queue, behind regional center investors.
If the regional center program is not renewed (ever), United States Citizenship and Immigration Services (USCIS) may deny all pending applications based on regional center investments. In this scenario, regional center investors would fall out of the visa queue. This would highly benefit direct EB-5 investors already in the visa queue.

An ideal middle ground would be if Congress delays action and new direct investors navigate the issuance process before any legislative changes come into effect. Because the cut-off date is current, once an investor’s I-526 petition is approved, they can move straight to visa issuance and admission to the U.S. While some potential EB-5 investors may be (understandably) hesitant to take these risks, others might take advantage of the opportunity (and face the risks) this situation offers to avoid the 10-year visa queue and lock in the reduced $500,000 investment amount.

Five Reasons To Seek EB-5 Investors In The Mainland China Market

The Chinese EB-5 market is attractive for business developers for five key reasons:

1. Conditions are ideal for sourcing new EB-5 investors. Although the future of the regional center program — and investors pursuing EB-5 visas through regional center investments — is uncertain, current conditions offer an opportunity to avoid the usual visa queue. Those who can afford to take the risk with less capital required at $500,000 will likely be eager to secure their U.S. permanent residency.

2. The EB-5 market is huge. China is the country with the most EB-5 investors. The backlog in petition processing for Chinese EB-5 investors began in May 2015, and this is the first time since then that their cut-off date is current. While the number of visas issued has declined, most EB-5 visas are still issued to Chinese EB-5 investors.

3. The EB-5 market is well-established in China. Considering the number of visas issued to Chinese EB-5 investors, despite the processing backlogs, the EB-5 market is well-established in China. This means potential investors are aware of the EB-5 program and its benefits, which can make it easier to attract new EB-5 investors, especially at the reduced investment amount of $500,000.

4. A network of brokers is available. Because of the large, well-established EB-5 market in China, a network of brokers is already in place, and these brokers tend to be experienced, with an excellent understanding of the EB-5 program. Thus, U.S. business leaders can use the existing broker network to source investors for their EB-5 projects without the added stress of working with unqualified and inexperienced brokers.

5. The market may not be aware of the benefits of direct EB-5 investment. Because the Chinese EB-5 market has been so focused on regional center investments, potential investors may not be aware of the advantages of direct EB-5 investment yet. Chief among these advantages is that the EB-5 application does not depend on a regional center, so the investor is not affected by the future of the regional center program. Investors may also be drawn to the opportunity to be involved in a less complex investment with a lower investment amount.

The Chinese EB-5 market offers excellent opportunities for business leaders seeking EB-5 capital. However, these opportunities face a time limit, so it would be best to look at your options now to make the most of them.

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