Fifty miles outside of Atlanta, Georgia, in a small town with a hardware store, cemetery and red-brick church, a high-end housing development — with 1,300 single-family homes, pickleball courts, and two lakes — is attracting significant interest from Chinese investors.
The flood of money into Hoschton is due to a wrinkle in a new law passed last year reforming the EB-5 program, an immigration-by-investment scheme run by the Department of Homeland Security (DHS). The new rules allow foreigners to apply for green cards with little wait time — which previously stretched to well over a decade for Chinese immigrants — by putting at least $800,000 into projects in rural regions, or areas with high unemployment.
Other remote places from Coalville, Utah to Big Sky, Montana are also receiving a surge in interest from wealthy Chinese people hoping to immigrate — even if it means plowing money into towns of which they may never have heard.
“The new categories present a once-in-thirty-year opportunity,” says Sam Silverman, the founder of EB5AN, an EB-5 project operator and investment fund manager. “For the last five years, there was minimal demand [from Chinese investors]. Now, it is bouncing back.” Silverman expects nearly half of the EB-5 investors for the $650 million Georgia project, which his company is managing, to hail from China.
Congress created the EB-5 program, which has funded famous developments like Hudson Yards and the Barclays Center in New York, in 1990 to stimulate investment and job creation. The program, under which the total amount of visas issued is capped at 10,000 per year, took off in the 2010s due to interest from Chinese investors; by 2016, Chinese individuals represented 83 percent of total EB-5 petitions, according to Government Accountability Office (GAO) data.
This massive interest, along with specific country quotas, created a huge backlog and wait times for Chinese investors that could stretch to 15 years. In turn, that led to a precipitous loss of interest from Chinese investors over the past five years: By 2021, Chinese applicants only made up 4 percent of EB-5 petitions.
Exact data on how much Chinese interest is bouncing back isn’t yet available, because the legislation is still recent and no applicant has received a green card under the new rules. However, lawyers and EB-5 consultants say they are seeing a two to three fold growth in Chinese interest, while the overall number of EB-5 petitions filed in the last three months of 2022 was up by 200 percent compared to the same months in 2021, according to U.S. government data.
The EB-5 Reform and Integrity Act, enacted in March 2022, made several changes to the program: it created the new categories for rural, high unemployment, and infrastructure projects, increased the minimum investment threshold to $1.05 million for projects not in the new categories, and put in place transparency requirements to stem issues of fraud and abuse which have long plagued the program.
High profile examples of EB-5 disasters dot major American cities — including a ferris wheel in New York’s Staten Island which attracted millions in Chinese investment before going bust in 2018; and a 42-story skyscraper project in Chicago, into which Chinese investors poured nearly $50 million but which never even broke ground.
Douglas Litowitz, a lawyer who represented Chinese investors when they sued the Chicago high-rise developer, calls the EB-5 program a “complete and total recipe for disaster.” He says the regional center program — which allows for the pooling of investor money and makes up the vast majority of EB-5 projects — is particularly ripe for abuse. It has led to unscrupulous middlemen heading to China to pitch projects to Chinese investors desperate for a green card, but with little understanding of the U.S. real estate market.
“It is set up where you put all this money in the hands of greedy developers,” he says. “The Chinese put in the money, then it gets loaned out, and the money is gone.”
Another major problem has been lack of oversight on the Chinese individuals applying. Qiao Jianjun, a Chinese fugitive wanted for stealing $98 million from the Zhoukou Municipal Grain Reserve, received a visa through the EB-5 program in 2009 before he was extradited to the U.S. in 2020.
The new law seeks to address such problems by requiring audits of regional centers every five years and establishing specific guidelines for terminating them.
A GAO report from March, 2023, however, found that the program still suffers from lack of transparency — the report recommended that United States Citizenship and Immigration Services, the agency in DHS charged with overseeing the program, collect and track data related to fraud and reasons for visa denial.
F. Oliver Yang, a partner at Reid & Wise who works on EB-5 cases, says that fraud is a big concern for his clients. But for wealthy Chinese immigrants, the desire to provide a U.S. education for their kids is still a major motivator to apply. The new law allows for ‘concurrent filing,’ which permits Chinese students in the U.S., for example, to remain there and maintain work authorization while they wait for the EB-5 process to go through.
Three years of Covid-19, with severe lockdowns and a subsequent economic slowdown, have also made many Chinese citizens reconsider where they want to live. On social media, the Chinese word ‘runxue or ‘run philosophy,’ went viral among Chinese individuals hoping to move out of China.
“Especially post Covid, people are thinking about the future and what happens if I can’t move. Covid changed the long term calculation,” says Kristin Surak, an associate professor of political sociology at the London School of Economics and author of The Golden Passport: Global Mobility for Millionaires (2023). “People are more risk averse, people are trying to diversify their risks. If there is another global pandemic, they want a place to live for six months.”
This broader reconsideration has also impacted lower-income Chinese immigrants who cannot afford an EB-5 visa. Over the last three months, there has been a surge of immigrants trying to cross into the U.S. through Mexico. U.S. Customs and Border Protection have apprehended 4,388 Chinese nationals at the border since October, according to official data, already double the total in the whole year of 2021.
For well-off Chinese people — who have long sought out second passports as a type of insurance — there are other citizenship and visa-by-investment programs in places like Saint Kitts and Nevis and Portugal. But in recent years, there has been a backlash to these programs, particularly in Europe, leading to their closure in Ireland, the U.K., and Cyprus.
The diminishing number of global choices for fast-track visas and passports is perhaps contributing to more interest in the U.S. — a trend which belies the overall deterioration in the U.S.-China relationship, and comes despite growing political opposition to Chinese buyers of U.S. agricultural land.
“I have had clients who bring up U.S.-China tension,” says Reid & Wise’s Yang. “But my response is that, as an individual investor, unless we go to World War Three, the macro situation is not going to affect them too much.”