When considering ways for expanding and enriching cooperation between the world’s two largest economies, many people and businesses first begin by asking, “What tools and resources are available?” Indeed, some of this column’s past topics have focused on educational exchange, tourism, and understanding differences in culture. This month’s article will take a closer look at some options for cooperation via investment.
Beginning with the Chinese side of the investment market, there are a few key factors that paint a very bright picture. Chief among these is the size and robustness of the market for foreign-direct investment. For instance, Nanjing’s vibrant local economy has attracted over 1,300 foreign-invested projects, to the combined tune of USD 40.3 billion. Around 200 of those projects come from Fortune Global 500 Companies, including IBM, Microsoft, Emerson, Ford, General Electric, and Citigroup.
Domestically, Nanjing is the proud home to a dozen Top 500 Chinese Private Companies, including Suning Holdings Group, which ranked No. 3 in 2015. Most of these local giants have made or are planning outbound investment in foreign countries. For example, Fullshare Group launched an investment portfolio of real estate, hotels and resorts, theatres, and eco-farms in Australia in 2008. A more recent showcase would be Sanpower Group’s acquisition of British retailer House of Fraser in 2014. These companies’ large cash reserves, along with the willingness to invest, have contributed to the city’s strong economic performance that is outpacing that of the national average. Last year, the local GDP of Nanjing amounted to over RMB 1 trillion, up by 9.2% over 2o14, and compared to the national GDP growth of 6.9%. Furthermore, the city’s general public budget revenue totaled RMB 100 billion with a year-on-year increase of 12.9%.
While large domestic companies are taking strides forward in outbound investment, China’s SMEs may also have interest but are unfamiliar with the channels and resources. And though the local government of Nanjing would love to help, support is limited beyond the border. In China, foreign investors are usually supported by a designated team from local industrial parks or development zones who help guide investors through site selection, business registration, and prepare for daily operations. Similar support services for Chinese investors in western countries would go a long way in attracting Chinese investment. Yet a major shortfall is general awareness, as noted by one Chinese investor who said, “Unfortunately, many Chinese are clear about the immigration process, but are not familiar with the [investment process].” Clearly, there is great need for more information about available investment channels and vehicles.
One such tool that is increasingly positioned for attracting Chinese investment to the US is known as EB-5. According to a NY Times article, EB-5 works “Through a federal visa program where a foreigner who invests $500,000 — and in some instances, $1 million — in a project that will create at least 10 jobs can apply for a green card. It generally takes from 22 to 26 months to obtain legal residency through the program, as opposed to several years for other visa programs.”
Notwithstanding the attractiveness of a green card, there are other aspects of the program to consider. Importantly, potential investors should understand the degree to which the US government will scrutinize their verification of funds, says Otis Moore, Principal of Westside Investment Partners. When meeting with potential investors, Moore is quick to point out that, “The USCIS typically looks to the past seven years to verify that appropriate taxes have been paid, that salaries are able to support the level of investment, and prior real estate and other transactions can be documented properly.” That’s why Westside Investment Partners prepares expert counsel with qualified immigration attorneys as part of the process, helping ensure their approval rate percentage is in the high-90s.
Most EB-5 investment into the US takes place in the real estate market, so it is fitting that Colorado is becoming a more significant player in this regard, driven by foreign investment into the development of a number of world-class assets in the Denver area. This has helped to “put Denver on the map” internationally, and applies healthy competitive pressure to traditional EB-5 destinations like New York and San Francisco. Recognizing this, Moore points to one local opportunity saying that, “In the Colorado market, nearly all of the resort areas qualify as rural census tracts, which would allow Colorado to spur new development through EB-5 investment in these areas with a rural designation while still satisfying the original intent of the program.”
Combined with the expert guidance of local companies like Westside Investment Partners, along with the support from local government organizations, opportunities like these could lead Colorado to become a top destination for Chinese investment.
-Sean Doherty is a Colorado native and graduate of Metropolitan State University, living and working in the Shanghai to Nanjing area of China. Sean represents the Denver South Economic Development Partnership as the Greater China Exchange Coordinator, focused on fostering the exchange of ideas, strategies, and talent between China and the metro-Denver area. He can be reached at KairosHappens@gmail.com
-Ray Xie is a Principal Staff Member of the Foreign Affairs Office of Nanjing Municipal People’s
Government. She is positioned on the American and Oceanian Affairs Division. Ray has been a part of several trips to the United States and has been responsible for the hosting of hundreds of international representatives on visits to Nanjing. Her efforts focus on helping local government agencies, industrial and high-tech parks, and educational institutions establish and nurture partnerships with international counterparts and businesses.