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