EB-5 Investor Program – China Update

Arnstein & Lehr Attorney Ronald Fieldstone

Ronald R. Fieldstone

EB-5 news highlights from November China trip

During my recent trip to China, I was able to meet with many professionals and marketing agents to determine the status of the EB-5 Investor Program in China and confirmed the following:

  1. There is still a significant interest in the EB-5 Program and actually a sense of urgency to have I 526 petitions filed as soon as possible in order to potentially have investors grandfathered at the current TEA requirement.
  2. There is serious concern about the U.S. Congress’ confusion and uncertainty, although the agents are confident the EB-5 program will be extended. However, since the details of same are still up in the air, the uncertainty is affecting the marketplace.
  3. The recent stock market decline does not seem to have any material effect on the availability of investors. What has been relevant is the increased government review and restrictions on exchanging funds and currency control. The governmental regulations on currency outflow have increased.
  4. There is still a significant concern about the quality of investments, transparency, due diligence and the like. Investors as well as agents have numerous projects to choose from, and therefore, they can be much more selective in choosing a project that has the least amount of risk with respect to both immigration compliance and return of capital.
  5. Another new development is that some of the agents are now undertaking private equity funding along with EB-5 capital, thus making them more like investment bankers, possibly on a more traditional investment with market standard rated rates. Some agents are taking the position that, by providing equity, they can take a more active role in protecting the investors in the overall operation and management of the project.
  6. Redeployment of Funds. The whole concept of the redeployment of funds could eventually have a significant impact on the market, given the fact that retrogression will extend the time period for I-829 adjudication. Accordingly, the agents and/or the fund managers will need to become more attuned to how to redeploy capital in order to maintain a reasonable return. But at the same time, they must meet the at risk requirements of IZUMI, which have yet to be determined by United States Citizenship and Immigration Services, as well as attempting to create a relatively liquid investment that can fund the distributions to those investors that receive final I-829 adjudication.

As of today, there still is no guidance from USCIS as to what it means to be “at risk” with respect to the redeployment of capital.

During the trip, I also spoke at the Overseas Investment & International Wealth Management Forum in Beijing. Please click here to view the handout that accompanied my presentation, “Structuring and Function of EB-5 Limited Partnership or Limited Liability Company for EB-5 Securities Offerings.”

If you have any questions about this post and/or other EB-5 Investor Program matters, please contact me. My contact information is available by clicking here.

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