Chinese Advocate Post #2: Hazards of Immigrating to the West
As more Chinese people are free to leave China and choose immigrate to the West, many are unaware of the many hazards of such immigration, and falling victim to them.
I came to the US when I was very young. My family had very little money. Perhaps that was fortunate, because we had very little to lose.
But today, many of the Chinese immigrating to the West are somewhat well off, with savings for buying houses and for their children’s education. The West seems ideal place to immigrate to, with clean and less crowded cities, and seemingly vast opportunities, and the pure prestige of immigrating. The Western governments, short on money, are eager to promote immigration options for wealthy Chinese as a potential new way to increase investments and economic stimulus.
However, the pitfalls are many, and many Chinese immigrants have lost money to dubious “immigration” problems. We discuss some of them below of recent interests.
(1) EB5 investment visa’s.
This is becoming a hot topic of immigration, where the US government literally offers a green card to those Chinese who are willing to spend “investments” to create jobs in US. Cost is minimum $0.5 million to $1 million, not including immigration legal fees of $10,000′s. There are many EB5 “investment” offerings around in US. But this was a relatively new and rarely used Visa option. Since the more recent increase in EB5 applications, particularly from Chinese immigrant applicants, the US government has also began to increase crackdowns on abuses. Here are a few things you need to know:
-Though this is called “investment”, the money invested cannot be guaranteed in any way. I.e. this is not some bank account. The money is not insured. It is in fact illegal for EB5 operations to guarantee any kind of “return of investment”. So, really, you should consider the money as basically a “fee” to buy a green card. Most of the EB5 investments are highly risky, incurring mostly short term costs, with very little possibility of capital gains.
-To get around the illegality of “return of investment”, many EB5 operations operate on the fringe of law, even with “bait and switch”. To lure Chinese EB5 investors, they give marketing brochures in Chinese that promise “projected profits” and ridiculous returns, up to 15% a year (which incidentally is close to what Madoff promised his investors). Thus, recently, the US government has began to investigate the practices of some of the EB5 operations. For example, this one http://gulfcoastfunds.com/ is under investigation.
-The other major problem is, EB5 applicants need to prove that their sources of funding are from legal incomes (not from corruptions, bribery, scams, theft, etc.). But how do you prove that your money was legitimate legal income?? The answer is, no one really knows. The US immigration service may approve the EB5 application, if you showed all of your financial records, bank account statements in China, that demonstrated that every cent you owned are from your Chinese business. But who is to say whether your Chinese business was not taking bribes??! That’s the problem.
You may feel pretty lucky that you got your EB5 approved. Congrats, you got your green card (with the fee of $0.5-1 million to the EB5 fund).
Problem: If in 5 years, someone accuse you of taking bribes in China, then the US government may decide to revoke your green card and deport you back to China, for lying to the US government on immigration application. Then, you are out of luck and out of $0.5-1 million and out of US green card (and permanently banned from immigrating to US, for lying to the US government).
-EB5 investments don’t include merely buying a house in US. A lot of Chinese folks had this misconception while back. And lost money in buying questionable real estate properties in US.
(2) Retirement funds, cross borders.
Some Chinese folks decide to immigrate to US for “retirement”. This is great, except when it comes to retirement funds.
Take a typical case. Somewhat well off Chinese civil servant couple in their 60′s decide to immigrate to US to live with their kids. They have income from their government retirement funds in China. But upon obtaining their US greencards, they are also eligible for some US social security benefits. They also work part time in US. A few years down the line, they “retire” in US, and get social security payments. They collect both retirement payments from China and social security from US.
But, many Chinese provinces are beginning to crackdown on this practice.
Under some current interpretations of Chinese laws, retirement incomes in China are considered pure benefits that may become ineligible if a Chinese recipient receives other sources of retirement income.
(3) Financial and tax record disclosures.
The biggest potential problem with immigration today, is that Western governments are increasingly scrutinizing the immigrants.
US particularly wants their citizens and immigrants to disclose virtually every financial information.
That means, if you get your US green card and start paying taxes in US, the US government requires you to tell them about every bank account in the world. (I don’t worry about it, because I don’t have much money).
For many wealthy Chinese, they are simply not prepare to disclose such vast amounts of personal financial information. (Afterall, in China’s rather lax financial system, many wealthy Chinese have lots of undisclosed accounts).
Many wealthy Chinese do not necessarily take the US law very seriously, but this is a huge potential mistake.
If you do not disclose your foreign financial assets to US government, the IRS can fine you, (and again, you could be kicked out of US for lying to the US government).
Other tax liabilities:
Even if you decide that you are just going to open a business in US, but not immigrate to US. Well, that’s still a problem, because your business in US is a tax liability, and that may give IRS an excuse to investigate your personal financial records too.
I’m not saying that Chinese folks shouldn’t immigrate, but I caution potential immigrants with starry eyes to learn more before taking the leap. Immigrants in the West face a hard life, even if they have money. If you are not careful, you may be cheated out of your hard earned savings and forced to give up your privacy for no good reasons.
Good day and good luck.