Opinion: Is China's EB-5 Market Slowing Down?
by Connor Chen
Recently, USCIS released the EB-5 petition data from the second quarter of the U.S. government’s 2016 fiscal year (January to March 2016). The second quarter of 2016 saw a deep drop in EB-5 applications, with only 848 I-526 petitions submitted. This is down from more than 6,000 per quarter in recent years.
Nearly every regional center official I meet asks, “Is the Chinese EB-5 market slowing down? Does the visa backlog issue make potential Chinese investors hesitate to go with EB-5?”
These are difficult questions to answer, since it is difficult to determine how significant the visa backlog issue will be in the long-run. But the Chinese EB-5 market is not slowing down; in my opinion, it’s merely resting.
Factors that I Feel are Influencing the Drop in Chinese I-526 Petitions
There may be three reasons why we have seen a deep drop in the number of petitions:
1. The Sept. 30/ Dec. 11 Deadline
Many people rushed to submit their applications before September 30, 2015, and then even more applicants sought to file in time for the December 11, 2015 extension. How frenzied was this period of time? We can tell from the EB-5 petition numbers over the last few quarters of 2015.
There is a joke around here about how to understand the current situation with I-526 petitions. In Chinese, we say, “The situation is likened to a cow that has produced too much milk for the past two quarters. Now, the cow has to be well-fed and rested before you can milk it again.”
Is this the biggest reason why we saw a drop in petitions? In my opinion, it is.
2. Spring Festival
Usually, every February is China’s Spring Festival season, which is the most important holiday for the country—comparable to Christmas in the United States. Output for nearly all Chinese industries, including migration, drops—which is completely normal. Business ramps up again in March and April.
Looking at the previous year’s number of petitions during the Spring Festival, the data shows there are normally some dips in petition numbers during this quarter, although never as big of a drop as has been seen this year.
So, the Spring Festival season alone does not necessarily explain this drop.
3. Visa Backlog
People are beginning to understand how serious the visa backlog issue is for the EB-5 program.
From followers’ comments or questions found online, it’s easy to see that most EB-5 investors do not really understand the visa backlog before they make their investment. It’s only later that they come to realize that although they were told it takes two or three years to get a conditional green card, the process in fact takes much longer. The current visa bulletin for EB-5 estimates how long new applicants should expect to wait, but it can still be misunderstood.
Over the past few months, with the line for EB-5 visas advancing slowly, and with this visa’s priority cut-off date set at February 15, 2014 for China-born applicants (per the July 2016 Department of State Visa Bulletin) , the Chinese market does feel quite discouraged.
Will the Visa Backlog Impact EB-5 Interest?
As more potential Chinese EB-5 investors come to understand that it will take them more than six years to get a conditional green card, and then an additional 10 years or more to get their investment back, will they still go with EB-5?
Yes and no. Some will quit and try another approach. Others will move forward, either because they do not really understand how serious the visa backlog is or because they have no other choice.
China has a significantly large base of upper-middle class citizens. If these citizens cannot find better solutions for their child’s education or for other immigration options instead of EB-5, the need for the EB-5 program will still be great.
Adapting to a New Generation of EB-5 Investors
The demand for EB-5 will remain, but the typical EB-5 investor is already changing. New EB-5 investors will be younger, pickier and more knowledgeable, with higher education and younger children.
This means that the regional centers or agents may face bigger obstacles in convincing the potential investors to make investments. EB-5 service providers may also need to put more money into their online marketing budget to target this new, younger generation of EB-5 investors.
If the United states cannot solve its EB-5 visa backlog issue, we may continue to see the numbers drop, but probably not as steep as we saw during the second quarter of fiscal year 2016. Even so, to return to the analogy from earlier, we may increasingly find Chinese EB-5 agents looking more like dry, over-milked cows.
 I say “usually” because the timing of the Spring Festival is based upon the lunar calendar. This results in the Spring Festival occurring on different dates each year, based upon the Julian calendar.