Guest Post: China’s Regulatory System for EB-5 Agents

By some estimates, roughly 80% of EB-5 investors in the popular USCIS EB-5 regional center program are from China. Given the importance of Chinese investment to the EB-5 regional center program, it is crucial that U.S. EB-5 regional center principals marketing EB-5 investments in China understand the Chinese regulatory framework for administering EB-5 in China. The following brief overview of the Chinese EB-5 regulatory regime is based upon my review of The Measures Concerning Implementation of Administration of the Activities of Emigration Agencies (effective January 1, 2002) issued by the Beijing Public Security Bureau, and the Beijing Administration for Industry and Commerce; the Circular Concerning Risk Prevention in Undertaking U.S. EB-5 Business issued by the Beijing Entry & Exit Service Association (2011 No. 029) (北京因私出入境中介机构协会 ); and my conversations with relevant Chinese government officials.

At present, EB-5 investments in Mainland Chinese (excluding Hong Kong, Taiwan, and Macau) may only be sold through Chinese emigration intermediary service organizations (中介服务机构) that (a) have been licensed by relevant provincial-level Chinese Public Security Bureau Entry-Exit Administration Bureau; (b) have executed written cooperation agreements with qualified U.S. immigration lawyers with at least 3-years EB-5 experience; and (c) whose EB-5 projects have been vetted and approved by the relevant local Public Security Entry-Exit Administration Department. A Mainland Chinese emigration agency may no
t sell an EB-5 investment unless it meets all three of the above criteria. While Chinese emigration agencies are administered at the local provincial level by the relevant local Public Security Bureaus and relevant local Entry & Exit Service Associations (因私出入境中介机构协会), the general administrative framework is the same as in Beijing.

The Chinese regulatory framework for administering Chinese emigration agencies in China is consistent with the standard dual overlapping State-Party administrative structure: The relevant local Public Security Bureau Entry-Exit Administration Bureau administers matters within the State administrative structure, while the relevant Entry & Exit Service Association administers Party matters. For example, item 1 on the last page of the Circular Concerning Risk Prevention in Undertaking U.S. EB-5 Businessissued by the Beijing Entry & Exit Service Association states that Chinese emigration agencies in Beijing must implement risk prevention measures in respect of EB-5 projects, and when undertaking EB-5 business, must engage in “self examination and self-correction” (自查自纠) , which is Party administrative parlance for relevant persons writing reports on others and circulating such reports within the Party organizational web.

According to relevant Chinese government officials that I have spoken with, it is possible to undertake a limited due diligence investigation of a Chinese emigration agency by visiting the relevant local Public Security Bureau Entry-Exit Administration Department administering the Chinese emigration agent. At a minimum, this government department should be able to tell you whether the Chinese emigration agent is licensed to engage in U.S. EB-5 specific work; whether the Chinese emigration agent has executed a written cooperation agreement with a qualified U.S. EB-5 immigration lawyer; and whether the specific EB-5 investment project has been vetted and approved for sale in China by the Chinese government. According to my discussions with relevant Chinese government officials, no Chinese emigration agency may execute more than 2 cooperation agreements with U.S. EB-5 immigration lawyers. Termination or amendment of the cooperation agreements with U.S. EB-5 immigration lawyers must be filed immediately with the relevant local Public Security Bureau Entry-Exit Administration Department.

From the perspective of the U.S. EB-5 regional centers, blind reliance upon Chinese emigration agents to obtain Chinese government approval of EB-5 investment products for sale on the Chinese market may be problematic. It is clear that the Chinese emigration agents have an incentive to make money. It is reasonable, therefore, to assume that some Chinese emigration agents may be inclined to favor large EB-5 regional center projects that offer the highest commissions and require a large number of investors since such EB-5 regional center projects are the most profitable to the Chinese emigration agents. Theoretically, such Chinese emigration agents may be inclined to not submit (or to not diligently push) some EB-5 regional center investment project approval applications with the relevant Chinese government approval authorities for sale on the Chinese market.

For more information on how to undertake due diligence in China in respect of Chinese emigration agents and how to get your EB-5 regional center project investment approved for sale in China, please contact me at: BlayneyConsulting8888@gmail.com