Tag: China Outbound

Three Emerging Trends of Chinese Tourists

September 12, 2015

airplane-takeoff

The word is out: Chinese tourists are coming for you! Over the last decade, outbound trips from China have increased substantially. In 2014, Chinese tourists made over 67.5 million trips abroad. We should expect these trends to only increase as China’s wealthy have by now already developed a strong need to explore new places to sightsee and park their cash. Here are three trends for you to be aware of to stay ahead of the “China Tourism Wave.”

  1. CHINESE TRAVEL TO CITIES

According to a report by Oxford Economic and International Hotels Group, blog585% of Chinese travelers prefer traveling to big cities.

 

2. CHINESE TRAVELERS MOVE TOWARDS INDIVIDUAL TRAVEL

No matter where you are from, you’ve probably at one time or another encountered a large Chinese tour group: lots of Chinese in a pack taking pictures, walking around confused, with a tour guide carrying a little flag on top of a long, skinny pole.

But Chinese travelers are starting to change, move away from the pack mentality and more towards traveling with their immediate family or by themselves.

Why is this happening? In part, it is because with new wealth and education, Chinese are able to navigate trips by themselves. They no longer have to depend as much on travel agencies or group travel packages.

What’s more, Chinese travelers are often economic travelers in the sense that they really know what they want to BUY before leaving home and know where they can buy it. Chinese are largely going abroad in search of luxury goods that they cannot get at home, like jewelry, antiques, or designer clothes, or perhaps going to buy discounted tech products that are way more expensive at home. They follow big brands like Louis Vuitton and Michael Kors, and they tend to go to the biggest, best places that they can buy them.

3. DOMESTIC SERVICE PROVIDERS DOMINATE

Chinese service providers are responding to and cashing in on these trends. In terms of travel booking, travelers are now mostly going to online travel booking sites. The two that dominate the China market are Qunar.com and Ctrip.com. It is clear that more Chinese travelers are using these platforms to increase the bookings.

Domestic hospitality and airline companies are also investing significantly in building full-service platforms in foreign countries frequented by Chinese travelers. In the aviation industry, many Chinese domestic airlines like Air China and China Eastern has already started operating directed flights from multiple cities in China to a variety of cities in North America like Los Angeles, Las Vegas, New York, and Houston.

One big company to watch out for in this space is Hainan Airlines (HNA Group). HNA is a monster in the airline and hospitality industry, and they are becoming one of the biggest players in terms of providing “go-abroad” services for the Chinese traveler. They have already begun operating direct flights to Seattle, and earlier this year started a direct flight to San Jose. On the hospitality side, the company is looking to make acquisitions and joint-ventures with foreign hospitality management companies. In June, HNA acquired 15% of North America’s Red Lion Hotels Corporation, and seem poised for more.

If you’re looking to attract more Chinese tourism dollars to your business or community, it would be smart to look at partnering with some of these domestic service providers.

 

 

The Canadian Immigration Investment Program is CLOSED; U.S. Open for Business

There will soon be a boom in the U.S. immigrant investment program as the Ottawa government made a surprise announcement to close their immigrant investment program.

My take on this was published in China US Focus, or you can read about it below:

Canada Closes Its Doors for Immigrant Investors: A Boon For America?

In a move that took almost everyone by surprise, last Wednesday, the Ottawa government declared that it would be closing its immigrant investment program for good. This comes after almost two years of a complete standstill in the program, with no visas being issued to any applicants since before 2012. That gridlock led to a backlog of over 65,000 immigrant investor applications, some dating back to as early as 2008.

Since the program was halted in 2012, Ottawa had maintained that the program would be opened again sometime in 2014. However, it appears that the pressure to close the program proved to be too great. Unfortunately, for those that have been waiting in line, in some cases for perhaps four years or more, there will be no Canadian Permanent Residency waiting at the end of this road.

It is no surprise that the biggest demographic impacted by this bombshell decision is Chinese investors. According to official numbers from the Canadian government, around 45,000 applicants waiting in line were from Mainland China.

One Door Closes, Another Opens 

As we speak, Chinese applicants and the hundreds of immigration agencies all over the country are going over options. In an industry that is far from transparent, Chinese investors that were counting on the program to be reopened are now wondering what direction to go in. Whether they were interested in living in Canada, starting a business, or in most cases, sending their child to school, their plans that had been many years in the making will have to be altered.

Just south of Canada, though, there is another country with its own investor immigration program that looks like the most natural choice for recently rejected would-be Canadian immigrants. The U.S. EB5 program boasts all of the benefits of the Canadian program, and over the next few months we may witness one of the biggest moments in the program’s history. 

Canadian Program Basics 

The Canadian and U.S. program differed in a variety of ways, both having merits and shortcomings in comparison to one another. From the mid-90s up until mid-2011, Canada dominated the market. The program had been a $400,000 loan to the federal government, which was returned to the investor without interest five years after making the investment. In 2011, the program was raised to a minimum $800,000 investment in an attempt to slow things down; applications still poured in which led to the 2012 halt and today’s outright cancellation.

One of the biggest advantages in the market was that the Canadian program was a no-risk loan to the government, unlike the U.S.’s $500,000 at-risk investment scheme. In a country where trust is scarce, many Chinese flocked to the Canadian program simply because they knew that as long as they could wait in line, the government would guarantee their green card and their money. 

The U.S. EB5 Program: A Life Preserver for Clients Rejected by Canada

Since the stall of the Canadian program in 2012, the U.S. EB5 program has started to pick up more and more steam in the Chinese market. In 2011, 2530 EB5 visas were issued to Chinese clients, just shy of 80% of the worldwide market. In 2013, that number was already up to 6895 visas, taking up 81% of the market. That number will likely rise this year in response to the drastic change in Canada.

Agents across China that had previously made their bread and butter from processing clients into the Canadian program had started to shift their business models towards including U.S. programs on their docket, and now that trend will almost certainly go forward at a harder pace.

In many ways, the U.S. program is an easier and more attractive option for Chinese clients. Although the investment is required to be “at-risk,” it is cheaper in price: $500,000 into a venture that creates 10 jobs, as opposed to the Canadian scheme of investing $800,000 to the government. Plus, the wait times are much more reasonable. The U.S. program is averaging between 15 and 21 months, whereas at best, clients looking to the Canadian market could have expected at least a two to three year wait, if not more.

What to watch for in the EB5 program? 

Many clients will be considering the U.S. program in depth for the first time. One of the most frequent questions I have received in the last few days is “Could the same thing happen in the United States as in Canada?” While there is no guarantee, it seems extremely unlikely that the U.S. EB5 program would suffer the same fate as the Canadian program. The investments, for starters, are very different functionally. As a condition of the visa, the U.S. $500,000 investment must create at least 10 jobs, which is a direct link to actual economic development. The Canadian counterpart was only indirectly tied to economic growth and job creation.

The EB5 program, most recently renewed in 2012, was actually one of the few things Congress has agreed to at all in the last few years. It was passed unanimously in the Senate and breezed through the House with only 3 dissenting votes. I doubt in an election year, any politician will risk his or her political future on taking a crack at eliminating EB5.

Indeed, what may be more important for clients now considering focusing their aim on the United States is choosing a good American partner for the investment. The Regional Center that our company operates in, the Metropolitan Milwaukee Association of Commerce Regional Center was approved in 2007. At the time, it was the 21st regional center in America. Today, there are over 400! Competition is fierce, and most in the business are newcomers. Now is the time for clients and their agents to analyze projects closely and go with the companies that are committed to building quality, long-term, safe projects.

I believe that for whatever reasons the Canadian government decided to close its program, this is a huge opportunity for America. Communities around the U.S. that are most friendly and welcoming to our Chinese friends and other international friends, and have ready U.S. projects to boot, and will gain the most.

Dan Redford is the Director of China Operations for FirstPathway Partners, and industry leading EB5 immigration fund manager. He also serves as the President of the Michigan State University Beijing Alumni Club. You can follow him and his perspectives from China athttp://www.danredford.com.

The Age of Chinese Outbound Private Investment – Published in China US Focus

I am honored to once again be published in a great periodical, China US Focus. This week, I discuss a growing trend that deserves all of our attention: the rise of Chinese private outbound investment. You can read the article on China US Focus here, or read on below:

The Age of Chinese Outbound Private Investment

While the mainstream media debates the future of the Chinese economy, the opportunist understands that China’s rapid economic growth path is only just now starting to bear fruit. We are at the beginning of a new chapter in the Chinese economy: the age of outbound private investment.

It is no secret that during China’s historic economic rise, the country has made significant investments abroad. But up until just a few years ago, a vast majority of this investment was state-led. According to the Rhodium Group, from 2000 – 2011, 70% of China’s outbound investment was carried out by state-owned enterprises. The economic climate has changed drastically in a short amount of time. In 2012, private firms represented 80% of China’s outbound transactions, and just this year, private companies accounted for 16 out of 17 Chinese outbound M&A deals.

Private firms are increasingly looking into more mature markets like the United States to grow their companies. Top industries of choice for Chinese firms include engineering and contracting, energy and mining, household appliances, automotive, and financial services. These types of investments save and even create jobs in the United States, further integrating our two economies and building a great pie.

Recently, there have been a few high profile purchases by large Chinese companies. Last year, Chinese real estate and entertainment conglomerate, Dalian Wanda Group, purchased AMC Theatres for over $2 billion, and is gearing up to use it as a platform for further expansion into the U.S. market. Even more recently, China’s biggest pork producer, Shuanghui International, bought out Virginia-based pork producer Smithfield foods for $4.7 billion.

It’s Not Just About the Companies, It is About the People 

These large-scale private purchases are merely harbingers of a greater trend of private investment and people flow between the United States and China. It truly is the dawning of a new age.

Chinese individuals are more and more looking for ways to get their assets out of China. They are spurred not only by uncertainties about the future of the Chinese market, but also certain present realities. A great majority of China’s private wealth has been built on real estate. But now, in an effort to push down inflation and prevent a housing bubble, the Chinese government has been imposed strict regulations on real estate speculation. In Beijing, for example, the purchase of a pre-owned home is now subject to a 20% tax. On top of that, even owning a second home in Beijing has been banned for new buyers.

There seem to be more changes on the horizon that are causing Chinese investors to look outward. The Chinese weibosphere (equivalent of U.S “twittersphere”) went crazy early in October when a State Council member announced that as part of the upcoming plenary session, the government is considered installing an inheritance tax.

In light of all of all this, entrepreneurial Chinese are wasting no time figuring out ways to get around this by getting out. Emigration to the West has become a preferred option. Tens of thousands of Chinese high net worth individuals are emigrating every year. They see an American green card or other residency permits in Western countries as a safety precaution; a vehicle to make it easier to move money, and their families, out.

Still, China does not make it easy on individuals to get their money out of China. According to Chinese law, an individual is only allowed to transfer up to 50,000 USD worth of Chinese yuan out of the country annually. That means that these investors need to be creative and use their network to move their assets into foreign markets.

This bodes well for foreign financial firms and money managers that stand to grow a multitude of Chinese clients in this space. Currently, there is $4 trillion of private wealth sitting around in China. Astonishingly, only 7% of that is under management. That means over $3.7 trillion of Chinese wealth is unmanaged. Why is this the case? The concept of having third party management of wealth has only begun to emerge in China. In the Chinese economy, the guanxiculture that places so much emphasis on who you know that it makes people very unwilling to trust others, even professional financial managers, with their money. But now, the learning curve that comes with investing in foreign markets is now forcing Chinese to look to professionals to help them.

New Investors, New Markets 

In fact, if Americans can understand how new and untapped this opportunity is, an earnest effort to seek out and welcome private investment from China can help to resurge our economy and rebuild communities that need a kickstart. Americans and Chinese people are actual two sides of the same coin; largely what we know about each other is what we read in the newspaper. For that reason, it is no surprise that historically, individual investment in the United States from China has been concentrated in large, high-exposure markets like New York or Los Angeles. The tide could be turning, however, as more and more investors understand that those markets are becoming saturated. They are starting to look for answers elsewhere.

Take Detroit for example. Although the Detroit market on the surface seems decrepit and failed, the Detroit real estate market has struck a cord amongst Chinese homebuyers. According to the United States National Association of Realtors, the Detroit market was one of the top 5 most inquired about markets amongst Chinese real estate buyers. This seemingly is an anomaly when considering the other markets that have historically caught the eye of Chinese such as New York and Los Angeles.

In Milwaukee, we have been able to attract hundreds of millions of dollars through the EB5 program from Chinese investors. These people are becoming more sophisticated, understanding that the best, safest, and even potentially biggest boon markets in the United States are outside of the major metropolises that they have heard of.

The time is now to start building relationships of trust directly with Chinese investors. The wave of outbound Chinese investment is only just beginning; the playing field is leveled. The question is, are you ready to ride the wave?

Daring People to Dream in China – US China Focus Exclusive

I am proud to have been featured in this week’s edition of US – China Focus. This website is a great emerging tool for students of the ongoing, complex relationship between our two countries. I wrote a piece about upcoming privatization reforms in China, and how the next wave of Chinese development needs to “dare people to dream.” You can read the article on US – China Focus, or read the text below:

China’s Upcoming Privatization Reforms: Daring People to Dream in China

Dan Redford, Director of China Operations for FirstPathway Partners

For over thirty years, China’s economy has been a disruptive and powerful force in the global economy. Now, China’s newly minted leadership has the challenge of managing this powerful economy as it shows signs of tiring. Problems of high inflation, rising property values, and a high level of bad government debt all threaten to throw China’s economy off track. Further privatization has been accepted as a way to combat these challenges, particularly in opening up government project contracts previously offered exclusively held by state-owned enterprises to the private sector. To really ensure effective privatization, China must develop a culture of innovation that gives Chinese people more ownership over the direction of this giant economy.

China’s education system is a significant barrier to innovation. Unlike in the United States, where education involves a healthy mix of in-class testing and extra-curricular activity, China’s education system is almost 100% based on test scores. From primary school all the way through to high school graduation, Chinese students are preparing for the gaokao, a written test that each student takes after completing high school that will determine their collegiate path. It is a high-pressure system that forces students to focus on test scores and numbers, and does not foster creative thought. 

Even more constraining is the strong divide between social classes. This is not the first time in China’s history that the leadership has made sweeping statements about reforms in China’s economy. The question is, will people believe that they will become a reality? China is divided into three basic classes – laobaixing (common people), fuerdai (the rich), and tanerdai (government officials and colleagues). These differences are so pronounced that it is hard for Chinese people to imagine any reforms that would change their relative position within this system.

These two aspects of Chinese society deter innovation, evidenced by a marked increase in dissatisfaction by average Chinese citizens in this economy, and an exodus of China’s rich, would-be innovative class.

Since moving to Beijing in 2011, I’ve witnessed the attitudes of average Chinese people go through a steady change. For common people, pride and excitement in China’s economic growth are gradually being replaced with disappointment and resentment. Last week, I had a cab driver ask me if the U.S. would consider liberating China instead of Syria. Why?

“This country is completely unfair. This country gets richer and richer, but I work harder and harder, and make less money.”

This change in attitude is growing along with divide between rich and poor. The government understands the severity of the problem. In January they released the official Gini Coefficient, which measures income disparity within an economy, for the first time since 2005. The Chinese claim that the number sits at .474, though a majority of independent assessments from scholars put the number over .6. Both numbers are over 0.4, which is considered a standard breaking point at which society as a whole starts to turn from generally satisfied to generally unsatisfied.

These statistics play out in China’s cities where working class citizens and migrants work and live in close proximity to the wealthy and powerful. Last year it was announced that over 51% of China’s population lives in urban areas, and China expects to enact plans to make that number increase to 70% by 2025. Unfortunately, with limited education and poor platforms for social mobility, the cities are being filled more and more with people that are not in a position to offer innovative value to a society that needs it.

At the same time that migrants and low-educated people are growing their presence in China’s economic hubs, certain habits of the educated and wealthy indicate a need to create incentives for innovation.

One of these habits is emigration. In a 2011 survey of Chinese citizens with net worth of over 10 million RMB ($1.53 million), it was discovered that over 60% said that they were considering emigrating from China. The survey, developed collectively by Bain and Company and China Merchants Bank, shows that the wealthy in China are either not sure about the trajectory of China’s future, or that they are just generally dissatisfied. One thing is clear is that they are not willing to stick around to spend time investing and innovating in the Chinese economy.

In China’s new era of privatization, the leadership should frame the reforms around giving average Chinese people incentives and resources to “dare to dream.” They will find ample opportunities as they start to open contracts previously held exclusively by state-owned enterprises to private companies. These large contracts should be given not just to those with government relationships, but those that demonstrate that they can give the best performances. Over time, this will provide evidence to Chinese people that society is indeed changing, and that taking a more entrepreneurial path could be an acceptable track to achieving a better life in China. Eventually, this will give the government teeth to actually reform the gaokao-based curriculum and encourage a balanced education system that gives Chinese people the incentives to think outside of the box. This is how to create a healthy economy that depends on and fosters innovation within its people.

Dan Redford is the Director of China Operations for FirstPathway Partners, and industry leading EB5 immigration fund manager. He also serves as the President of the Michigan State University Beijing Alumni Club. You can follow him and his perspectives from China at http://www.danredford.com.

Governor Snyder Delegation Makes Waves in China

Two years ago, Governor Snyder came to China to start building a relationship almost out of nothing. At the time, it had been 11 years since a governor of the state of Michigan had come to China; Snyder vowed to reverse this trend and put Michigan back in the game to attract business and investment from this economic giant.

On Friday, Snyder and a delegation of 60-plus Michigan business owners and MEDC representatives left China after his now 3rd consecutive trade mission in as many years. As a Michigander that has been living in Beijing since the governor made his first trip, I am amazed and encouraged by the progress that has been made. Last year, the trip was headlined by the opening of the Michigan China Center in Shanghai, and this year, the governor took the message of the “Comeback State” on the road to Beijing, Shanghai, and Chongqing.

Third Trade Mission Delegation was dynamic, successful

Governor Snyder and I at the Beijing Reception - September 11, 2013
Governor Snyder and I at the Beijing Reception – September 11, 2013

The delegation itself has matured greatly from two years ago. It was exciting to mingle with so many high quality Michiganders at the governor’s reception in Beijing and see the hope and excitement they have being introduced to business in China. Although auto-related companies still represent the lion’s share of stakeholders in the bilateral relationship, this year’s delegation had a larger presence from service providers in a variety of industries. Terry Terry, President of Lansing-based video production and event management company MessageMakers, came with the delegation to not only film the historic visit but to also identify partners in China to grow his global business.

It was clear that real business was done on this trip. Prior to the Beijing reception, timber manufacturer and designer Morabark Industries of Winn, MI signed an agreement with a Chinese partner to formalize a business collaboration that will bring jobs to both Michigan and China.

The Pure Michigan Brand is gaining steam in China

Snyder’s efforts are clearly helping the name and reputation of the  “Pure Michigan” brand spread very quickly in China. During this trip, he secured a meeting and press conference with China’s Vice Premier Wang Yang, in which both agreed that there were a myriad of opportunities for a state like Michigan to collaborate with China. The Mayor of Chongqing, Huang Qifen, seemed to agree, penning a memorandum of understanding to build stronger economic ties between the city of 30 million people and Michigan. Government meetings at that high of a level would have been impossible two years ago.

What is even more amazing is the quality of the contacts the state has built in the private sector as well. In Beijing, the governor led the MEDC in meetings with the Chinese giant entertainment and real estate conglomerate, Wanda Group. Wanda group is growing into one of the largest and fastest growing private companies in China; last year, Wanda bought AMC Theaters for $2.6 billion, and is gearing up for huge foreign investment projects in the U.S. and throughout the world. The fact that Snyder’s team has at least put Michigan on the radar shows that Michigan is starting to get taken seriously.

Congratulations to Governor Snyder and this year’s trade mission for a successful trip! Please remember there are still thousands of Michigan resident expats here in China that are proud of where we come from, and are looking forward to helping contribute to building the Pure Michigan brand in China!

 

The Six-Step Approach For China to Help Rebuild Detroit

Detroit’s announcement of chapter 9 bankruptcy was a difficult but essential step for the city’s resurgence. Now, more than ever, what Detroit needs is belief. Detroiters have to believe that the city will come back; and if new people are going to be attracted to become residents, they’ll have to believe that Detroit is safe, exciting, and profitable.

This type of belief only comes from raising and executing bold ideas. Here’s one: invite China to be a key partner in the revitalization of Detroit. What better statement could be made than to have a city like Detroit, for years mired by resentment of a China that is “stealing our jobs,” finally grow up to strategically engage the world’s second largest economy?

The Washington Post recently published an article outlining six crazy ideas for rebuilding Detroit, so I thought I’d add a twist to that. Below, I propose a six-pronged approach to building the “China Engagement Strategy to Help Rebuild Detroit.” It is a long-term vision, which needs to start with getting people face-to-face, building trust, and ultimately result in real investment and jobs coming into Detroit from this unlikely partner.

1. Pure Michigan in Chinese

Unsurprisingly, Chinese people largely associate the city with the blight, unemployment, and violence that they see on TV. The only way to bring in investment is to get actual people into the city. Investing in a “Pure Michigan in Chinese campaign” will allow Michigan and Detroit to cash in on the growing number of Chinese tourists using their expendable cash to tour America and hopefully change their perception through a direct exchange.

2. Build a strong Sister City Relationship between Detroit and Chongqing

People-to-people exchange needs to increase to build trust. A great platform for this would be bolstering the Sister City relationship between Detroit and Chongqing, which happens to be one of the world’s fastest growing cities

Governor Snyder seems to be ahead of the game on this one as he is planning a stop in Chongqing on his upcoming trade mission. May I suggest he kindly ask Chongqing to write a check to fund a vibrant sister cities program with Detroit?

3. Engage Chinese students in Michigan

Between the University of Michigan and Michigan State University alone there are currently over 5,700 Chinese students going to school in Michigan. While they are pumping in millions of dollars in revenue to the state every year through tuition and fees, that just tips the iceberg. Most of these students would be dying to get job experience during their time in Michigan, even if that required living in Detroit for the summer. These students have the power to change the narrative.

4. Get the EB5 program working in Detroit

Developers around the country have been using the EB5 immigration investment program since 1992 to fund job-creating businesses. Though there are six approved regional centers in Michigan, all with jurisdiction in Detroit, so far, there has not been a successful EB5 case in Detroit, or even in the state of Michigan for that matter. In 2012, over 80% of the visas issued to foreigners thru this program came from China.

5. Detroit Real Estate purchases

Recently, the United States National Association of Realtors noted that Detroit cracked the top 5 most asked about real estate markets from Chinese buyers. Why not use the attention the city is getting now to promote the great properties that already exist? The bankruptcy could indicate to some that now would be the time to buy when prices are at rock bottom in anticipation of a climb.

6. Court China to buy Detroit ‘s assets and invest in companies

China’s government is in a position to make outward investment. They have the world’s largest stockpile of foreign currency reserves, now standing at over $3.44 trillion. China is in the midst of deciding whether or not maintaining such a high number of reserves is literally getting the most bang for its buck, and is making a pivot to make overseas purchases and investments.

What might Detroit have that would be interesting to the Chinese? Of course, as an industrial and manufacturing hub, Detroit has access to infrastructure and technology patents that have continued to grow the presence of Chinese automakers in Detroit. Huge parcels of land are also available at rock bottom prices that are ripe for business development.

If we really believe that Detroit can rise up from rock bottom, it is going to take a few bold ideas like these to make this city tick again. Consider me a believer!

What is China saying about the Detroit bankruptcy?

Obviously, some of the biggest news to come out recently in Michigan, and quite frankly, the nation’s, history, was that of the Detroit bankruptcy. Since I live in China, I took the liberty of compiling a few headlines from major Chinese newspapers and e-zines to give you a glimpse into what Chinese media is saying about the bankruptcy. Indeed, Detroit has a long way to go to change the perception as a crime-ridden, impoverished place. Here’s to looking up!!

 

1. “底特律破产带给中国的启示：城市不是造出来的”  (Detroit’s bankruptcy has revealed to China one thing: The city cannot be built)

Source: Sohu Business

2.” 底特律破产警示城镇化弯路 “(Detroit bankruptcy warns the winding course of urbanization)

Source: Guangzhou Focus

3. “七嘴八舌话底特律破产” (A Lively Discussion in the Auto Industry about Detroit Bankruptcy)

Source: Auto.sina.com.cn

4. 底特律申请破产 “造中国底特律”论遭质疑 (Detroit’s Bankruptcy Raises Doubts about building a “Chinese Detroit” Partnership)

Source: Anyang Online (originally from Xinhua)

5. 底特律破产风险有多大 (Detroit’s Bankruptcy: How Big are the Risks?)

Source: QQ.com Auto

Detroit Attracts Chinese Real Estate Buyers – Detroit News Op Ed

The U.S. National Realtors Association recently announced as part of its report that Detroit ranked in the top 5 in terms of inquiries from Chinese buyers interested in U.S. real estate.

This is an awesome revelation and opportunity for Detroit! I co-wrote a piece on the topic with my colleague, Lamar Irby and Bryan Withall, and the Detroit News picked it up! You can read the op ed by clicking here or read the original below:

Detroit breaks the top 5 for inquiries from Chinese Buyers of U.S. Real Estate

By Dan Redford, Bryan Withall, and Lamar Irby

The time may be right for Detroit to roll out the red carpet for Chinese real estate buyers. In the recently published, “2013 Profile of International Home Buying Activity” by the U.S. National Association of Realtors (NAR), Detroit ranked in the top 5 among hottest cities receiving inquiries from Chinese buyers looking to purchase real estate in the U.S. It certainly stood out as the most unlikely in the group, considering the other cities – Los Angeles, Irvine, Las Vegas, and Orlando – have long been established as strongholds for attracting Chinese investors.

 

How could this be? This recent announcement may not come as a surprise to those that were following Chinese CCTV and social media on the Detroit Real Estate market earlier this year. In March, the China Daily reported that some real estate properties were available in Detroit for $100. On China’s Twitter, Weibo, the term “Detroit Real Estate” was also trending along with “pixie” (English: “leather shoes”), using leather shoes as a metaphor for how cheap Detroit real estate is. The CCTV report alone garnered 1.2 million posts on Weibo, according to “Want China Times.”

 

The “leather shoes” phenomenon quickly died down in the media, but not before at least some Chinese buyers made purchases. And what is now made clear from the NAR report is that Chinese buyers for the moment have their eyes on Detroit. With increasingly strict purchase restrictions and higher taxes for Chinese citizens in their domestic market, the increasing trend is for Chinese to invest their growing assets abroad.

So, how can Detroit take advantage of this opportunity? While it is unlikely for the cheap $500 home buys to be a boon for the city of Detroit, the last thing Detroit needs is to lure Chinese investors into quick, cheap deals that end up being “less juice than squeeze,” if not financial disasters. Clearly, Detroit has a compelling real estate market and economic story of rebirth to tell. A strategy that highlights good deals in good communities in Metro Detroit could build a pipeline for long term Chinese real estate investment and more.

 

Success will come down to how well real estate brokers and officials can tell the story of Detroit and ultimately execute purchases. It’s not that Detroit is without merit. For starters, Detroit’s real estate market prices climbed 13.6% year on year from 2011 to 2012. With prices for homes in Detroit well within the median Chinese purchase price of $425,000, this evidence should be taken as an encouraging sign of vibrancy in the Detroit market.

 

The Chinese should also be invited to be part of the revitalization of Detroit. In the June 7, 2013, Financial Times Life Section cover story, “The Future of the American City,” Detroit was profiled as a “city in the midst of a mini-boom.” The article cited several large investments and businesses recently moving in to the city, such as the high-profile purchases of Quicken Loans CEO Dan Gilbert, as evidence to show that Detroit is indeed gradually rising. Real estate brokers in Detroit should consider translating this article into Chinese and spreading it to the Chinese market.

This can happen. Detroit can build again, and now is the time to welcome the help of our Chinese friends whose interest is already peaked.

–

Dan Redford graduated from Michigan State University and is the Director of China Operations for FirstPathway Partners, an industry leading EB5 immigration investment fund management company. You can follow him at danredford.com

 

Bryan Withall is the Managing Director and CEO of Sino Outbound Limited, a financial advisory firm serving Chinese investors, including both institutions and individuals, interested in overseas real estate assets and real estate related investments. For inquiries: bryan@sino-outbound.com

 

Lamar Irby is a Detroit native and serves as the Director of Finance for China ProSol Consulting Services Co., Limited (www.prosolchina.com). He is based in Beijing.

 

Is the Chinese Dream an EB5 visa? – posted on Caixin Media

I recently re-entered the blogosphere and twittosphere, and the Internet Gods have already been good to me.

I co-wrote a piece with my friend and colleague, Justin Knapp, who shares my passion for Michigan, about the current state of the EB5 Immigration Investment market in China. The article, “Is the Chinese Dream an EB5 Visa?,” was posted last week in China’s largest business and finance online journal, Caixin Online.

You can read the English version by clicking here, 中文点击这里, or read the full text below:

You can read more from Justin and how to live a “Richer, Fuller Life in West Michigan” at Goodallfocus.com.

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Is the Chinese Dream an EB-5 Visa?

Both China and the United States would benefit from expanded use of an American immigrant investor program

By Justin Knapp and Dan Redford | June 28, 2013

Dream chasing is a popular topic in China these days. Thomas Friedman sparked the debate last October when he wrote a column titled, China Needs Its Own Dream. More recently, TheEconomist and CNN have also taken a gaze into the crystal ball to interpret China’s dream.

Chinese leader Xi Jinping, has loudly adopted the slogan “Chinese dream” while keeping quiet on the details of what that dream might be. Meanwhile, the American dream continues to be peddled in China’s mainstream culture and media. With foresight, the United States can benefit from this trend.

Today, more Chinese nationals than ever before are trying to live their dreams, not within the borders of China, but by gaining permanent residency status in the United States through investment and job creation. In fact, according to the Hurun Wealth Report 2012, more than 16 percent of China’s millionaires have already emigrated or submitted immigration applications, while 44 percent are planning to do so.

The Immigrant Investor Pilot Program (the EB-5 visa) was created by the Immigration Act of 1990 to stimulate growth by attracting foreign direct investment and creating jobs in America. To qualify for a visa, individuals must invest US$ 1 million or US$ 500,000 in a Target Employment Area which is a rural or high-unemployment area. Additionally, this investment must create and sustain at least 10 jobs on American soil.

Demand for the visa has fueled growth in third-party managed investment vehicles known as Regional Centers which are both privately and publicly run. To illustrate how quickly the EB-5 program has grown in the United States, the number of Regional Centers has increased from around a dozen in 2007 to more than 250 today, including at least one in every state.

While the public profile of the program has been marred by a small number of high-profile, soap-opera-like scams, the difficulties faced by applicants are in fact more mundane:  identifying profitable investment projects and creating 10 jobs. After a two-year waiting period, if an investment project fails to create 10 jobs, the foreign investor risks losing their investment and permanent residency in the United States.

Last year, the U.S. Citizenship and Immigration Services hired half a dozen economists to help evaluate the job-production claims, but many believe this added scrutiny has created a bottleneck in the approval process. The Association to Invest in the USA, which advocates on behalf of Regional Centers and industry service providers, recently noted a backlog of nearly 6,000 EB-5 petitions which are currently held up. At the low-end, assuming US$ 500,000 per investment, that’s potential for nearly US$ 3 billion and 60,000 American jobs.

Finding information about the number of deals in the pipeline is challenging. It has been reported that American businesses raised more than US$ 1.8 billion through the program in the fiscal year ended September 30, and over 7,500 would-be immigrants were issued visas. Interestingly, 80 percent of them were Chinese, a dynamic shift from the mere 25 percent just four years prior.

Time will tell how China defines its dream, whether it creates one of its own or simply adopts the American dream along with an American home. For now, Chinese investment in the United States can help boost the economy and put Americans to work. If it can stick to its founding principles and map out a clear long-term vision, the EB-5 program shows promise in helping both Chinese and Americans realize their dreams of successful and healthy local economies.