By Kripa Upadhyay
Remitting funds to the United States (U.S.) to invest in the EB-5 visa program has always been challenging for investors with funds in China. The situation has become even more fraught due to recent developments.
China has always had strict remittance restrictions that make funding an EB-5 investment difficult. The country allows citizens to exchange and remit offshore up to the equivalent of US$50,000 per person per year. Given that the minimum investment amount was historically $500,000, changing to $800,000 post-EB–5 Reform and Integrity Act of 2022 (RIA), an investor working alone can’t fund an EB-5 investment.
The Chinese government has tried to crack down on sending money out of the country by directing banks not to allow multiple transactions from one account totaling more than $50,000. Chinese investors have resorted to using friends and family members; however, the government has started taking stricter measures on banks, making transferring funds more difficult.
WEALTHY CHINESE INVESTORS FLOCK TO SINGAPORE AMID ECONOMIC CHALLENGES
In recent years, crushed by COVID-19 lockdowns, a slowing economy, and stricter political controls in Hong Kong and mainland China, Chinese investors are more eager than ever to leave.
Many of the ultra-wealthy have flocked to nearby Singapore as their first home base outside China while they secure their funds and ponder their next moves. One way to acquire residence via investment in Singapore is to start a family office. The Government of Singapore requires an applicant to establish assets under management of at least 200 million Singapore dollars. Even with that high level of investment, Singapore witnessed an explosion of family offices from an estimated 700 in 2022 to about 1,500 in 2023, with about half of them originating from China.
This exodus of high-net-worth individuals (HNWI) from China has already led to a slowing economy and stricter controls. In an apparent sign of a strong lack of liquidity in banks across China, the Bank of China, as of early July 2023, had instituted a limit of 200,000 Yuan or $27,800 a day. Withdrawal of more than that amount requires booking an appointment at least 24 hours in advance; other banks are reportedly restricting outflows to 100,000 Yuan ($13,900) daily, according to local media reports.
The lack of liquidity in mainland China is manifesting in ways unimaginable a few years ago. As of May 2023, civil servants in certain local government jurisdictions were paid in digital yuan! This move seems to allow the government to gain better traction in promoting the implementation of digital RMB. However, there’s speculation that the measure is also meant to control the outflow of currency from a country still reeling from the impacts of the pandemic.
Also, Chinese authorities in early August detained He Mei, the founder and CEO of Wailian Group, one of China’s largest immigration consultancy firms. Rumors state that she was compelled to hand over her clients’ database for the last decade after her detention. Smaller immigration consultancies are also expected to face government crackdowns seeking to stem the tide of HNWI and their money leaving the country.
CHINESE EB-5 INVESTORS’ MONEY TRANSFER PATHWAYS
Regardless, Chinese investors continue to be one of the largest markets for EB-5 investments. However, the task of carefully documenting the source of funds for Chinese investors has become more difficult.
There are different ways to get money from mainland China into the U.S. The primary modes currently working are:
- Using Multiple Family and Friends: One manner is assistance from investors’ family, relatives, and friends. For example, investors can transfer money in China to relatives. These relatives can then transfer sufficient funds in USD into the investors’ designated account. Because there is no taxable gift in China, it is common for Chinese investors to transfer $50,000 annually per person to ten to 20 Chinese citizens.
Although common, this solution is fraught with complications and challenges. Once the investors have successfully found relatives and friends willing to help, they must then be able to prove the source of funds with bank statements showing the transactions; first, from their investor accounts to their relative, then from the relative to the US account, and finally from the U.S. account to the Regional Center (RC) or the new business.
However, Chinese government control is making this method harder to use by restricting the amounts of cash that can be moved this way when a single account abroad receives money coming from multiple sources in China.
- A transfer of the money from Hong Kong: After opening a bank account in Hong Kong, the E-5 investors go to a money-change shop, which provides a mainland bank account number for the customers to make a domestic transfer from their account inside China. Then, the equivalent amount of money from the domestic transfer is transferred in Hong Kong or a foreign currency into the client’s Hong Kong account. Any third party’s account used must be proven by an affidavit explaining the operation established by the third party involved.
Loan on a residence outside China: Now more popular due to the liquidity concerns in mainland China, EB-5 investors who had previously invested in residential or commercial properties outside China are increasingly using loans against that piece of property. Of course, the investor must then be able to document the source of funds to buy the property adequately and then transfer these funds to the U.S.
EB-5 CHINESE INVESTORS TO EXPLORE NEW MONEY TRANSFER WAYS AS REGULATION EVOLVES
Despite these increasingly stringent regulations and challenges posed by the Chinese government on fund transfers, Chinese investors are expected to remain resilient and continue exploring ways to source their funds for EB-5 investments.
As Chinese EB-5 investors adapt to these changing circumstances, new innovative money transfer pathways can be anticipated.
Kripa Upadhyay
Kripa Upadhyay is an immigration attorney with the law firm of Karr Tuttle Campbell (KTC). Based in Seattle, WA, she specializes in guiding corporate clients, individual investors and extraordinarily accomplished individuals through the complexities of U.S. immigration laws. Her team at the firm includes lawyers who are not just immigrants themselves, but more importantly, individuals who have lived for extended periods in other countries and are intimately aware of in-country rules and regulations. The attorneys on the team are fluent in a number of languages including Hindi, Mandarin, Nepali, Spanish and Urdu.
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