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Cablegate: China Sees Explosive Growth in Immigrant Investor Visas

VZCZCXRO3556
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0671/01 3451058
ZNR UUUUU ZZH
R 111058Z DEC 09
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 1161
INFO RUEHOO/CHINA POSTS COLLECTIVE 0375
RUEHBJ/AMEMBASSY BEIJING 0930
RUEHSH/AMCONSUL SHENYANG 0313
RUEHGH/AMCONSUL SHANGHAI 0303
RUEHCN/AMCONSUL CHENGDU 0304
RUEHHK/AMCONSUL HONG KONG 0372
RUEHUL/AMEMBASSY SEOUL 0040
RUEHIN/AIT TAIPEI 0277
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC 0059
RUEHC/DEPT OF LABOR WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASH DC

UNCLAS SECTION 01 OF 02 GUANGZHOU 000671

SIPDIS

STATE FOR CA/VO, CA/FPP, CA/P, EAP/CM

E.O. 12958: N/A
TAGS: CVIS CMGT KFRD ECON EFIN CH
SUBJECT: China Sees Explosive Growth in Immigrant Investor Visas

GUANGZHOU 00000671 001.2 OF 002


1. (U) Summary: Guangzhou saw an increase of over 600 percent in the
issuance of investor immigrant pilot program (EB5) visas from fiscal
year (FY) 2008 to FY 2009, with total applicants issued rising from
245 to 1,732, giving China the highest volume of EB5 visas in the
world. These applicants have invested over $280 million USD in
targeted employment-creation projects in the United States. With
the extension of the EB5 investor visa program and heavy marketing
in China, Guangzhou, China's only immigrant visa (IV) unit, expects
to see continued growth in this category. While this program
represents a valuable opportunity to attract large amounts of
Chinese capital to support U.S. job growth, lack of transparency in
China's financial system and unreliable documents contribute to
adjudication challenges and the possibility of fraud in this
category. End summary.

I Don't Want to Immigrate, I Just Want a Green Card
--------------------------------------------- ------

2. (U) Over the past three years, marketing of investor immigrant
(EB5) visas in China has steadily intensified, resulting in high
levels of public awareness and interest. China's burgeoning
population of wealthy citizens, many of whom still perceive it
difficult to obtain a U.S. visa, creates a natural market for U.S.
green cards. Many wealthy Chinese applicants see the $500,000
investment cost for U.S. permanent resident status for the whole
family -- with the possibility of seeing a modest financial return
on the actual investment at some future point -- to be a fair price
and a smart move. Conversations with many of these applicants
indicate that they do not plan to relocate permanently to the U.S.
Rather, they will continue to operate businesses in China and travel
frequently. Many, if not most, have high school or university-age
children, making access to U.S. education a strong motivating
factor.

3. (U) Most of the U.S. regional centers approved to participate in
the EB5 program are actively seeking investors in China. Several
representatives have visited the IV unit to discuss their projects
and visa application procedures, and the NIV units in Beijing,
Shanghai, and Guangzhou have seen a proliferation of applications
from groups going to explore potential investments. Guangzhou's
Deputy IV Chief and Fraud Prevention Unit officer recently attended
an EB5 investment seminar for a project in South Dakota.
Prospective applicants asked a few questions about the investment,
but most questions were directed towards immigration benefits. The
presenter made a point of noting that just because an applicant
received a green card through the program did not mean the applicant
had to move to the United States. When an audience member asked
whether or not the consulate would delve into applicants' finances,
the presenter assured the audience that records would not be
rigorously examined, and that most interviews took between three and
ten minutes.

4. (U) Potential Chinese investors are served by a rapidly expanding
industry of specialized visa brokers and consultants. Companies
deemed qualified by the Chinese government to be EB5 visa brokers
are registered through the Public Security Bureau (PSB). There are
currently 524 entities which have been approved by the PSB. While
the PSB approves these brokers, post is unaware of any mechanism by
which the brokers' marketing activities or services are regulated.
Recent conversations with a U.S.-based EB5 broker indicated that
some brokers are attempting to thoroughly vet potential applicants.
This particular broker maintained that it is possible to get a solid
picture of an applicant through biographical information and
personal financial documents. To make sure the applicant is
legitimate, the broker follows the trail of wealth of the funds
deposited, making sure they were derived from legitimate means.
However, the broker noted that he does not look at all aspects of
the applicant's wealth, only whether the funds deposited are
legitimate. In cases where the EB5 application fees have been given
as a gift, the broker will look at the trail of wealth for the
person who has supplied the investment capital. The broker noted
that complaints about the EB5 process in China tend to center on the
high fees charged to applicants by brokers, including some
accusations of brokers who have stolen funds intended for
investment.

Adjudication Issues
-------------------


GUANGZHOU 00000671 002.2 OF 002


5. (U) EB5 applications present numerous adjudication challenges.
While U.S. law requires that investments be made with "capital
obtained through lawful means", in practice it is difficult to make
this determination for Chinese applicants. Cases routinely include
hundreds of pages of Chinese financial documentation, which is
frequently unreliable and, even if legitimate, is beyond the
expertise of IV staff to evaluate in detail. Additionally, due to
the strict mandates of China's Foreign Currency Exchange Act,
transferring investment funds out of China is a difficult task. To
stay within the confines of Chinese law, yet satisfy the "investment
or actively in the process of investment" provision of 8 CFR
204.6(j)(2), applicants often create an offshore escrow account to
secure the investment funds before transfer to the U.S. enterprise
once immigrant status has been granted. Applicants commonly
establish the escrow accounts in Hong Kong. To transfer the
required $500,000 investment to Hong Kong, applicants often use
multiple transactions involving different individuals, thus
confusing the trail of wealth and making even very legitimate cases
hard to evaluate. Separately, post has limited information on the
progress of job creation targets for the regional programs in the
U.S. Post has contacted USCIS to learn more on its adjudication
criteria in order to develop a training program for visa officers.


6. (U) While post has not yet detected any cases of outright fraud
relating to the investment funds used to qualify for EB5 status,
there have been some questionable cases. Some applicants have
little knowledge of the program in which they are investing; some
are even unaware of the rate of return on the investment. This lack
of knowledge makes it more difficult to judge applicants' bona
fides. And, as always, the allure of a U.S. visa has attracted
other kinds of fraud. In one case, an investor visa applicant
appeared for interview with his wife and four children. When
suspicions arose about their relationship and the consulate
suggested the possibility of DNA testing, the applicant admitted
that two of the children were not his own. In a separate case, post
assisted the Internal Revenue Service in a tax evasion investigation
of an EB5 recipient. As the program becomes more and more heavily
marketed, it is likely that more such problems will be detected.

COMMENT
-------

7. (U) Guangzhou expects to continue to see an increasing number of
EB5 investor immigrant applicants and will seek to develop better
means to evaluate these cases through more direct communication with
USCIS on criteria, updates in the program, and reports on any fraud
trends which have been discovered by USCIS. Guangzhou officers and
LES will also continue to monitor reports on the EB5 program in
China, including complaints about problems involving EB5 visa
brokers or agents. End Comment.

GOLDBECK

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