Three-Cushion Shot for Chinese EB-5 Investors Is Little Used

By David North on July 6, 2021

Recent State Department data indicate that relatively few rich Chinese investors in the EB-5 program have used a clever three-way scheme that would secure for them immediate U.S. investor visas while becoming (for a price) citizens of the Caribbean island nation of Grenada along the way.

The perceived problem: tens of thousands of EB-5 investors have put up $500,000 to become permanent resident aliens of the U.S. but while they have written the checks, the U.S. country of origin limits on visas have postponed the creation of the visas. So those with backlogged visas have neither their half a million, nor a useable visa, at least for a number of years. (The minimum investment has since been raised to $900,000.)

The bright idea of a poor nation, Grenada: why not make it possible for those Chinese, for a fee of $150,000 to $200,000, to become citizens of Grenada and then secure immediate nonimmigrant visas through another program that is open to citizens of Grenada, but not to citizens of Mainland China. After a while in the U.S. the Chinese users of the scheme could move from nonimmigrant to immigrant status.

The program Grenada has in mind is that for seldom-discussed Treaty Investors (E-2) which gives easily renewable, but not permanent visas to those who start a business in the U.S. The bottom line for this program is not defined and people have been known to get a visa through it for as little as $50,000 or $100,000. While EB-5 is run by the Department of Homeland Security (which has limited business expertise), the E-2 program is run by the State Department (that lacks both business expertise and an US-based work force to supervise the program.) For more on the E-2 program, see here.

A substantial number of Koreans, for example, have opened laundry/dry cleaning establishments via the E-2 program.

So how many of the Chinese EB-5 investors have actually used this via-the-Caribbean approach? The State Department’s statistics are not detailed enough to show how many Chinese EB-5 users had subsequently secured Grenadian citizenship and then got E-2 visas, but they can give us an upper bound, the total number of E-2 visas granted to Grenadian citizens in general. We previously had, using a partial estimate, said that in Fiscal Years 2018-2020, that 121 seemed to be upper bound for those three years.

We now have complete data for these three years, and know that the actual upper bound was 91, not 121. FY 2021 data are not yet available and those numbers would have been impacted by the virus threat, which was not true for the earlier years. The 91 total would include the investor, his or her spouse, and his or her children under 21. With an average family size of, say, three, that would mean only about 30 investments, or ten a year.

So what does this new data tell us?

First, I must admit that I have nothing first hand; I have not talked with any Chinese/Grenadian EB-5/E-2 visa holders, nor have I seen any data from the Grenadian immigration service. Nor do I know how comprehensive has been the Grenadian campaign to sell this idea in Mainland China. For more on that, see this website.

But I suspect that one of the two reasons that so few Mainland Chinese have spent the additional money on this route is its obscurity; a second reason, and here I am speculating, is that many of those in the waiting list for the EB-5 program have no interest in meeting the E-2 program’s main criteria, starting a business in the U.S. The EB-5 investors have the needed money, but what they want is a second passport for their families, and little more.

The main part of the EB-5 program, which lost its congressional authorization the other day, is for passive investors; they need not even know what happens to their money; while the E-2 program is for people who want to start a business in the U.S. (I ran into an EB-5 migrant in a university setting a few years ago, and asked him what he had invested in; he said, New York City real estate; I asked in which of the boroughs; he did not know.)

So maybe many of the EB-5 investors are not really potential immigrants in the classic sense, they are understandably nervous about living in China and want an escape route if need be.

I have seen enough anecdotal evidence – would-be EB-5 visa holders talking to me, and to an attorney I know who handles such cases – to think that many of them simply want to have the right to settle here, but are not interested in actually working here.