China’s Upcoming Economic Tsunami

In a recent conversation with a trusted colleague who has been practicing immigration law in Southeast Asia for many years, he used the word “tsunami” to describe what he foresaw in China’s economic future.  Such a perspective defies the conventional wisdom espoused by many in the EB-5 legal and business development community, in which there has been a consensus that China is currently saturated with the weight of too many – hundreds! – of EB-5 projects, most of them from Lamesville.

I agree with my colleague, and the perception that China’s EB-5 investor pipeline is slowing down is, IMHO, nonsense.  The so-called “second tier” cities in China have barely been touched; we’re talking tiny villages of less than five million people. (-:  Tsunami indeed!  In recent blogs I’ve told you about various internal events in Chinese politics which are spurring interest in emigration within China’s emerging affluent class.   Buried in my massive “to read” pile was a May, 2011 article by Richard Hornik, a contributing editor to the Harvard Business Review, which I long ago read and wanted to share with you.  It’s an outstanding article (you have the link above) but there are key points which tie in with what I’ve been saying in recent weeks:

Those of us who’ve spent the past year nurturing EB-5 projects in China would be less than honest if we did not relay a sense of growing interest, even anxiety, from the reputable migration agents in that country who are faced with the double whammy of investor visa unavailability in their traditional Canadian and Australian markets along with a plethora of EB-5 projects which are more style than substance…and made all the scarier by messes Missouri’s Mamtek fiasco.  The report, predictably (given its Kissinger-esque, pragmatic perspective), found that such impact should be welcomed:

But Mr. Hornik notes that reading between the lines and in consideration of the intellectual property breaches and GOC(Government of China)-driven cheap financing available to Chinese investors, a rational person has plenty of reason to worry. Excerpted from the report:

“…there are concerns that China is so large and influential that its state interventions will distort world prices and markets.”

As they say at Columbia’s International Tax LLM program, “no DUH”. (-;  What is intriguing to me is that what might trigger fear in the eyes of an educated economist observing this dynamic instead triggers joy – and, all too often, greed – within a U.S. EB-5 sector still reeling from a banking industry which has, for all intents and purposes, frozen U.S. development as a knee-jerk result to the financial crisis.  Mr. Hornik’s article draws a great comparison to the post WWII economic explosion experienced in Japan as witnessed by the U.S.  He observes:

Let me tell you, I REMEMBER that Time Magazine cover story he wrote, way back when I was a front-line visa officer in Ciudad Juarez, Mexico and Sting still had hair.  Mr. Hornik notes correctly that the past two decades of U.S. economic engagement with China has not advanced China’s political system and that it has, in fact, regressed.  Consider the GOC’s direct shut-down of China’s private real estate market in the past year and it is clear that “economic liberalization” is in the eyes of the beholder.  As a witness to all of this, it is bewildering to me:  how precisely does one reconcile the real estate freeze with the GOC’s recent open collaboration with the World Bank in examining the best paths for stable and open economic growth for the nation?  No clue on my end, and while Mr. Hornik does not profess to have the answers, I will end today’s entry with his closing words in the article, which sum things up as well as I ever could: