For the second year in a row, the Association to Invest in the U.S.A. (IIUSA) is partnering with the American Chamber of Commerce to represent the United States at the China International Fair for Investment and Trade (CIFIT). IIUSA is the official trade association for operators and stakeholders of the EB-5 regional center industry, and this year once again will utilize the CIFIT platform to bring regional centers together in the Chinese market.
This year, one of the hottest topics at the USA Pavilion will be the recent announcement that Chinese visas in the EB-5 category will not be available until October 1st, marking the first time in the history of the program that a quota has been imposed.
What is CIFIT?
CIFIT, now in its 19th installment, is an international trade and investment exhibition that is hosted in Xiamen, China from September 8 – 11. The event is one of the largest global trade fairs held in China every year, and is China’s only international forum that is focused on building bilateral investment. As in years past, this installment of CIFIT is expected to bring in over 100,000 visitors and participants from over 40 countries.
What to expect at CIFIT?
A large number of participants in the event are members of local trade promotion or economic development organizations from countries around the world. For many smaller countries, this is a unique opportunity to develop collateral and introduce their products and niche industries to the Chinese market. During the day, they will mingle with visitors to their respective booths, introducing all that their economy has to offer. At night, Xiamen lights up. Local restaurants and nightspots are filled with exhibitors having dinner and discussing business with Chinese government officials or potential partners that they are looking to court for long-term business. For some, this is the only time in the year that they have the chance to strike a deal in China.
For its part, Chinese exhibitors use the event as an opportunity to promote new innovations and new infrastructure improvements in the Chinese economy. Usually, each individual province, and in some cases some larger cities like Shanghai or Shenzhen, will have its own display on the concourse. Since many foreigners have only a basic knowledge of China’s geography and economy, CIFIT has become a critical opportunity for lesser-known areas in China to make a splash with foreign audiences. Readers are familiar with Chinese metropolises like Shanghai, Beijing, and Hong Kong, but provinces like Qinghai, Gansu, and Xinjiang are able to use the exhibition itself and the meetings that take place during the conference to create opportunities to take home and develop over the next year.
What to expect from the U.S. Delegation to CIFIT?
As demand from the Chinese market continues to grow tremendously for the U.S. EB-5 immigration investment program, CIFIT was identified last year as an opportunity to bring together EB-5 operators with Chinese immigration agents to discuss developments in the program. This year, over two dozen EB-5 regional centers will host a booth at the event to promote their respective projects and introduce their company to conference attendants.
The EB-5 industry continues to see rapid growth; both in terms of the demand from the Chinese market as well as operators in the United States. Only a few years ago, EB-5 was a strange, largely unknown alternative financing option for development. However, since 2008, it is quickly becoming a preferred financing mechanism across the country, giving developers access to FDI that would have been otherwise out of reach without the EB-5 program. The program has been a boon for the U.S. economy. According to IIUSA, from FY 2005 – 2013 EB-5 was responsible for an influx of $6.5 billion into the economy, creating over 131,000 jobs. A vast majority of that boon has come from Chinese applicants, collectively accounting for over 80% of applicants worldwide.
While this growth has been exciting, it has presented some challenges that need to be addressed in due course. One issue is the regulation and over-sight mechanisms that should be put in place to increase the integrity of the program. There are now over 500 approved regional centers operating throughout the United States, resulting in hundreds of projects available in the market for investors to choose from. While in some cases diversity and choice can be a good thing for the consumer, when it comes to EB-5, the rapid increase in new regional centers and new projects leaves the door open for fraud and misrepresentation. In China, where growth in the number of “immigration consultants” that are in business to advise Chinese high-net worth individuals on immigration options, a mandate has been issued to create a more transparent way to identify quality, honest operators and good projects. Recently, the members of IIUSA adopted the Code of Ethics and Standards of Professional Conduct to address this issue, with the goal of creating a stronger, more transparent industry moving forward.
Additionally, and perhaps a more pressing topic of interest, will be the discussion of the recent announcement that EB-5 visas will be unavailable for Chinese applications until FY 2015, which begins on October 1st. To explain briefly, there are only 10,000 EB-5 visas available in any given fiscal year. While each country is only slotted 7% of the visas annually, or 700, if there are unused visas from countries with lower demand, those visas can be allotted to countries with higher demand. Since Chinese applicants have accounted for over 80% of the market, all unused visas have typically gone to them. However, this year the demand from other countries was higher than in years past, resulting in the State Department’s decision to stop issuing visas to Chinese applicants until the fiscal year resets in October.
This is a complex issue that has industry stakeholders in China and the U.S. concerned about the future of the program. If the quota policy remains unchanged, it is inevitable that next year there will be another quota imposed for Chinese clients, a problem that will make the EB-5 process much longer for Chinese applicants.
Industry best practices and transparency, along with the sudden unavailability of EB-5 visas for Chinese applicants, will no doubt be high priority discussion points for visitors to the U.S.A. Pavilion at CIFIT.
For those out there interested in exploring the EB-5 program, or becoming more familiar with what is happening in cities and provinces throughout China, CIFIT is a great event worth attending. Xiamen welcomes you!
Dan Redford is based in Beijing, China where he serves as the Vice President of Investor Relations for Civitas Capital Group, a leading independent specialty asset management and financial services firm with operating divisions focused on Alternative Investments, EB-5 Funds and Wealth Management. He is also the President of the Michigan State University Beijing Alumni Club.