People who immigrated to America during the 19th and 20th centuries built the industrial bedrock of this nation. They arrived with nothing but the clothes on their backs and a few bucks in their pockets. The vast majority of these immigrants were Europeans, although people did arrive from other continents as well. Most were fleeing famine, wars, political oppression, economic hardship, or religious persecution. They spent weeks sailing the high seas just to come to America. Some sailed as first- and second-class passengers “(billionaires, stage stars, merchants, businessmen and the like)” while many others traveled in steerage. Those in steerage made the journey with the help of relatives and friends. Because third-class passengers were poor, they usually couldn’t afford to buy a ticket without raising the money to cover the cost.

The immigration experience for steerage passengers was the worst. They weathered dark, pungent, crowded, and unsanitary conditions that often led to their deaths. They were herded like cattle to Ellis Island and Angel Island, although there were other immigration ports throughout the United States. They made the arduous journey because they were promised opportunity and golden streets. They were promised the American dream.

The reality, on the other hand, was quite different. A now-famous anonymous quote borne of the immigration surge to America at that time best sums up the common sentiment:

“I came to America because I heard the streets were paved with gold. When I got here, found out three things: First, the streets weren’t paved with gold; second, they weren’t paved at all: and third, I was expected to pave them.”

Immigrants lived in overcrowded, unsanitary tenement slums ripe with squalor and disease. They worked dirty, dangerous jobs. Immigrant men were commonly employed as gravediggers, coal miners, fisherman, stevedores, and stonemasons. A great many worked as laborers who built railways, canals, bridges, and buildings. Others labored on farms. Women and children were forced to work long, grueling hours in oppressive sweatshops in unsafe or unhealthy conditions for very low wages. Women were also employed as servants or domestic workers. These brave people worked endlessly and tirelessly to make their American dream come true.

Those who entered the United States at processing facilities like Ellis and Angel Islands were vetted through physical and mental examinations, as well as literacy tests. If they failed, they were subject to quarantine, hospitalization, or deportation. Many people died in such facility hospitals; however, others were born there too. Unfortunately, steerage passengers’ experiences at these facilities were grim. They were often the victims of unfair discrimination, mistreatment, and abuse.

Despite all of the above, waves of immigrants continuously made the journey because America offered them hope and chance — impossibilities in their native countries. And through the legal process, immigrants became naturalized citizens (there were exceptions, of course).

This portrait paints a stark contrast to today’s legal immigration landscape.

You’ve Got the Money, You’ve Got the Golden Visa

Since 1990, the U.S. government has allowed foreigners to pay their way into America through its Immigrant Investor Program or EB-5. Permanent residency, granted via green cards, has been an easy and profitable reality for thousands. Although this visa program is open to people of all countries, the vast majority of applicants for EB-5 are from China. And there’s a good reason for this domination: China is extremely wealthy (thanks to the international community, especially America). Therefore, for Chinese foreign investors (yes, I said investors), that old promise holds true. For them, America’s streets really are paved with gold.

Let’s Understand China’s Wealth First

In 1978, China’s government underwent economic reform. It “encouraged the formation of rural enterprises and private businesses, liberalized foreign trade and investment, relaxed state control over some prices, and invested in industrial production and the education of its workforce,” per an International Monetary Fund (IMF) article. Prior to the 1978 reforms, China had an agricultural-based economy, but after that year, the economy evolved into one driven by higher-value-added manufacturing. Additionally, China’s open-door policy welcomed foreign direct investment, ushering in further economic transformation for the country.

In 1989, companies began incorporating outsourcing into their business strategies, and throughout the 1990s, it became mainstream business economics. Outsourcing is the hiring of an outside party to perform services and create goods that would typically be performed or made in-house by a company’s own employees. Companies adopted this strategy to cut costs, and it really gave China a boost. The global implementation of outsourcing has made China an export-driven economy. As of 2018, “China was the United States’ 3rd largest goods export market” and America’s 2018 trade deficit with China was $378.6 billion, per the Office of the United States Trade Representative. This massive deficit means China has a huge trade surplus. A trade surplus means China exported (sold) more goods and services to the U.S., then it imported (bought) from the U.S.

So what does China do with this surplus? They buy U.S. Treasury bonds. China’s exporters are paid in U.S. dollars, but exporters sell the U.S. dollars for their official currency, Renminbi (RMB). They make this sale so they can pay their workers. However, China’s Central Bank (the People’s Bank of China or PBOC) buys the excess U.S. dollars from exporters in order to increase the value of the USD and raise the demand for RMB. It’s like anything else. If something is rare, it’s more valuable. So by making the USD scarce, it sets the dollar’s value at a higher rate. And by buying up the available excess U.S. dollars, China is building up its foreign exchange reserves (forex reserves) with American money (other currencies as well). In essence, China is investing this money back into the United States so America can continue to buy their goods and services. It’s a codependent relationship. If China did not buy the excess U.S. dollars from exporters, RMB would appreciate in value, leading to costlier exports, loss of business for China, and high unemployment for Chinese workers — not something an export-driven economy wants.

In 2015, the Chinese people began demanding the exchange of RMB for foreign currencies like U.S. dollars so they could diversify their asset holdings. The Chinese government met their demands and sold their held assets (i.e., U.S. Treasury bonds) to give to Chinese businesses and households. Essentially, the Chinese government (including the PBOC) have less money, but Chinese citizens have more and, as a result, the people of China are investing their new money in the United States via EB-5 (and through other means that I will get to later in this article).

I do want to mention though that the U.S.-China trade deficit has been fluctuating from month to month throughout 2018 and 2019 for a combination of reasons. The data is detailed in the U.S.-China Economic and Security Review Commission.

Now Back to the U.S. Government’s EB-5 Program

In 1990, Congress created the EB-5 Immigrant Investor Program with the goal of issuing 10,000 green cards in exchange for these green card holders’ money. The minimum required amount for direct investment projects was $1 million and fell under the category of the Traditional Direct Program. This EB-5 visa program was created to stimulate the U.S. economy and was established under the ‘90s Democratic stronghold of both the presidency and Congress. However, it was established in response to the Reagan-era recession that plagued the United States during the 1980s. The idea of the program was that through capital investment by foreign investors and the subsequent creation of U.S. jobs America’s economy would improve.

In 1992, Congress added to the existing program by creating the EB-5 Immigrant Investor Regional Center Program. Initially only a pilot program, Congress has extended it continuously since its inception. This Regional Center Program has reduced the minimum required amount to $500,000 and required investors to invest their money in commercial projects in rural areas or impoverished parts of the U.S., ones that had high unemployment rates. These are commonly known as Targeted Employment Areas (TEAs).

The majority of EB-5 capital investments are in commercial real estate.

There have been varying estimates regarding the financial impact of EB-5 and the number of jobs its created. It was stated in a court document for a 2018 class action lawsuit filed in the U.S. District Court for the District of Columbia (Feng Wang, et al. v Michael R. Pompeo) (which I’ll get to later) that EB-5 has brought in $11.2 billion in capital investments for U.S. companies between 1990 and 2014. Furthermore, the court document stated that the Immigrant Investor Program added more than 70,000 US jobs during those 24 years.

However, according to Bernard Wolfsdorf, a top U.S. Immigration attorney who penned an open letter to President Trump asking him to eradicate EB-5 Obama-era regulations which raised the Regional Center minimum to $1 million, the program apparently has allowed China to invest $20 billion in the U.S. since 2014 alone.

If you think about it logically, China, in actuality, is investing the U.S.’ money back into the United States. If there wasn’t available excess U.S. dollars gained from U.S. importers paying Chinese exporters, then there would be no U.S. dollars for the Chinese government to sell to China’s central bank, and subsequently, no U.S. dollars to give to the Chinese people. Therefore, China wouldn’t have trillions of American dollars saved in U.S. Treasury securities to spend.

But I digress.

Regional Centers are designated organizations (pre-approved by the U.S. government) that sponsor capital investment projects. The funds from Regional Center projects are meant to boost the local economies of impoverished or rural areas. While the Traditional Direct Program results in direct job creation (e.g., construction workers working on the construction of a building), the Regional Centers result in both direct and indirect job creation (e.g., the manufacturers making the materials for the construction project).

Through Regional Centers, an investor can invest money in a new commercial enterprise through crowdfunding — a technique used by entrepreneurs and inventors to raise millions of dollars to fund the development and production of new projects or devices. Crowdfunding is not used with the Traditional Direct Program.

The requirements for the EB-5 visa program are detailed on the U.S. Citizenship and Immigration Services (USCIS) website and cited below:

• A foreign investor must invest in a new commercial enterprise, defined as any legal for-profit activity formed after Nov. 29, 1990, or
• A foreign investor must invest in a commercial enterprise established on or before Nov. 29, 1990, that is:
  1. “Purchased and the existing business is restructured or reorganized in such a way that a new commercial enterprise results, or
  2. Expanded through the investment so that at least a 40-percent increase in the net worth or number of employees occurs”
• The investment must create “full-time positions for at least 10 qualifying employees.” A qualifying employee is a U.S. citizen or legal resident authorized to work in the United States.
• The EB-5 investor of a troubled business “must show that the number of existing employees is being​,​ or will be​,​ maintained at no less than the pre-investment level for a period of at least ​2​ ​years​.”

A job-sharing arrangement is also allowed under the EB-5 Immigrant Investor Program. This means two or more employees who share a full-time position count as full-time employment, as long as the weekly hourly requirement is met, that is. This arrangement excludes part-time, temporary, season, etc. positions. However, any job expected to last longer than two years usually isn’t considered temporary or transient in nature and does qualify as full-time employment.

Both EB-5 programs (Traditional Direct Program and Regional Center Program) result in investors receiving their green cards. If after two years an investor can prove that their investment has been financially successful and has met the job creation requirements, they receive permanent legal resident status. However, under EB-5, investors’ spouses and unmarried children under 21 years of age are eligible to apply for green cards too. Green card holders and their families are not required to apply for citizenship under U.S. law but may if they so choose.

Not Everything Is Peachy Keen

Throughout the years, there have been many calls to reform the EB-5 visa program because foreign investors are abusing the program’s loopholes, and in some cases, investors are getting swindled.

A lot of corruption lies in the Regional Center Program. If you recall, Regional Centers must use the funds from new commercial enterprises to improve economies in rural or impoverished areas of the U.S (Targeted Employment Areas (TEAs)). Currently, TEAs are designated by state governments, not the federal government — one reason many want the program to be reformed. When it comes to TEAs, a kind of gerrymandering takes place. As reported in the New York Times, Manhattan’s $25 billion Hudson Yards, a luxury real estate project, was partially financed through EB-5 by the authorization of N.Y.S. The state also allowed the Hudson Yards high-end geographic location to qualify as a TEA by gerrymandering a map that connects the neighborhood to public housing projects in Central and East Harlem.

When applying for the EB-5 visa program, applicants must state the origin(s) or their funds. However, Chinese investors are working the system because there is no way to trace funding origins. However, both the Chinese and American governments are cracking down on anti-money laundering practices.

Chinese investors are also sometimes victims. An investor doesn’t play an active role in the project as the developer does, so the developer will sometimes reinvest the investor’s money elsewhere.

Another point of contention with the program is the U.S. government’s so-called Counting Policy. In that previously mentioned court case (Feng Wang, et al. v Michael R. Pompeo), the court document for the case details the argument that the U.S. Department of State is systematically diluting the “visa pool by individually counting the spouses and children of investors against the EB-5 quota.” The Plaintiff argues that the “Counting Policy unlawfully erodes the number of visas available for actual investors, prolongs wait times, separates immigrant families, and undermines the U.S. economy.” There is a substantial backlog, and the majority of the green card holders through the program aren’t actually the investors themselves, but their spouses and children.

According to the National Association of Home Builders, opportunities for financing residential projects through EB-5 exist provided the developer or builder meets EB-5 standards. Funding non-commercial projects with EB-5 money is becoming more common these days. U.S. real estate brokerages have taken advantage of this and actually advertise American for-sale properties in China. Just one example of the U.S. real estate advertising in China is Warren Buffett’s holding company, Berkshire Hathaway HomeServices. The holding company signed a marketing contract with Juwai, China’s largest International Property Portal. Chinese nationals purchase U.S. homes as investments, which drives up real estate prices and leaves the average U.S. taxpayer unable to afford a home of their own.

Advocates for the program are “developers seeking cheap loans, immigration attorneys, China-based migration agencies,” and Regional Centers, per a PBS article. Program supporters say it creates jobs at no expense to U.S. taxpayers, but that all depends on how you look at it.

In a 2013 U.S. News & World Report article, John Vogel, former adjunct professor at Dartmouth’s Tuck School of Business, wrote:

“One of the oddities about the EB-5 program is that the U.S. government is giving out the green cards, but the entrepreneur who puts together the investment gets the money. This scheme seems inefficient and open to corruption. If our government really believes that it is a good idea to sell green cards, maybe we should drop the pretense that this is a job creation program. It might be more efficient to have the money go directly to the U.S. Treasury and reduce the deficit by billions of dollars a year. In fact, the U.S. government could auction off these green cards and perhaps raise even more money.”

The EB-5 visa program even put President Trump’s in-laws in hot water.

In May 2017, after the president signed the Honoring Investments in Recruiting and Employing American Military Veterans Act of 2017 (HIRES Act of 2017), also known as the Appropriations Act, it came to light that language in the bill had nothing to do with the legislation itself. The language instead pertained to visas, including the EB-5 visa. What was scandalous was that shortly before President Trump signed the bill, Nicole Meyer, the sister of Jared Kushner, Trump’s son-in-law and presidential adviser, went to China “to encourage investors to take advantage of the program by investing in Kushner Companies,” as stated in a Forbes article. Ms. Meyer came under fire for her actions because they were suggestive of Kushner Companies profiting from the U.S. federal program. A clear conflict of interest. Kushner Companies later apologized citing Ms. Meyer’s bringing up of Jared Kushner in her conversations with investors was in no way meant to lure Chinese investment.

Is It Too Late?

According to the USCIS website, in December 2018, the EB-5 program expired due to a lapse in congressional reauthorization. However, in January 2019, President Trump signed legislation reauthorizing the Regional Center Program through February 15th. When the 15th of February rolled around, the president again extended the program, this time through Sept. 30, 2019.

At a time when President Trump is cracking down on both illegal immigration and fraudulent legal immigration cases, it’s a wonder why he isn’t tackling reform or the eradication of the EB-5 Immigrant Investor Program. Other countries affected by the influx of Chinese investors have set higher financial thresholds to slow down the flow of investments, but not the United States.

A March 2019 Forbes article cited the text of an article published by ILW, a leading immigration law publisher. The article explained, how at this point in time, only a select number of people can intervene in the EB-5 program. So it’s up to Mick Mulvaney, director of the Office of Management and Budget, one of his staffers, President Trump, or one of the senior presidential advisors. It’s not likely anything will change.