The pro-democracy protests in Hong Kong that began in September this year may have an impact on the EB-5 world in the US. Namely, that dissatisfaction with the government may lead some of Hong Kong’s wealthier citizens to seek quick immigration options to other countries.
A Brief History
For those unfamiliar with the system of governance in Hong Kong, it operates under a limited democracy, often referred to as “one country, two systems”. This is the result of the 1997 returning of the island to China by the British, who had held since their victory of China in the 1839 First Opium War. Since 1997, Beijing grants Hong Kong certain limited freedoms that it doesn’t to other parts of China: a four tiered seemingly autonomous government system with its own checks and balances, a capitalist economy and a democratic voting system.
The democratic voting system hit a hitch in August this year when reforms in Beijing lead to a change in the way the head executive of Hong Kong is chosen. These reforms require a special election committee in Beijing to select the three candidates for the people of Hong Kong to chose from; the subtext being that these are three people that are acceptable to the Communist Party. The Guardian UK has done an excellent job explaining the development.
How This Could Affect EB-5
When individuals participating in EB-5 are asked why they are immigrating, they most often comment that it is to give opportunities to their families and their children. In a nutshell, this is a primary reason for all immigration in general. An Immigration.net survey listed among the top reasons for immigration: financial security, a higher standard of living, better education, and seeking a safer political climate. To those that are financially able to consider immigration as an option, providing these opportunities for their family is a strong motivator to immigrate.
Taking all of this into consideration, one must also remember that it is common for an inciting political incident or change in laws to create mass waves of migration from one place. These motivations and the political climate in Hong Kong may create the perfect storm.
Look at the case of Hong Kong in the 1980’s and 1990’s. Thirteen years prior to the handover of Hong Kong back to China, the British and Chinese government signed the agreement that the island would be returned in 1997. This was public knowledge and able people started to leave Hong Kong in droves. By different estimations, between 25,000 and 35,000 people left each year until a giant spike in 1989. The Tiananmen Square protests happened that year. Evidently many Hong Kongers didn't agree with how their soon-to-be leaders handled the protest and there was an increase in immigration to 62,000. By 1990, 1% of the population had left.
Depending on how this civil unrest plays out in Hong Kong, EB-5 offers a potential way out for some citizens. It is no secret that there are many wealthy people in Hong Kong, though since 1997 many of them have stayed in what has been one of the trading and financial centers of Asia. Though these conditions are changing as well.
According to the World Bank, Hong Kong’s economy is suffering from the current protests, while China’s is not. A reported $50 billion drop in Hong Kong Stock Exchange share values has happened as a result of the protests. This comes at a time when for the first time ever (as of Sept. 1) Chinese investors are allowed to invest in the HKSE through the Hong Kong-Shanghai Connect. All of this could contribute to a shift in focus away from Hong Kong to Shanghai as the new financial center of China. Simply put, the conditions of life for the wealthy and upwardly mobile in Hong Kong may be changing for the negative.
The potential for a spike in Hong Kong EB-5 is not based on the protests alone. Rather, the protests and an exodus of citizens are both symptoms of the same potential cause: fear of Beijing’s control over Hong Kong’s citizens. The focus has been on the students, but it was only a student protest in the beginning and now more and more people are rallying behind them.
While not everybody in Hong Kong is camped out, a study by Hong Kong Polytechnic University showed that 59% of people support the protestors. This is a large number, much higher than the 1% of people who left in the 90s. Consider how a wealthy Hong Kong business professional reads this. Consider the longstanding Cantonese speaking communities worldwide (virtually every American Chinatown was established by Cantonese speakers). Consider the effect the last wave of Hong Kongers had on the real estate markets of Vancouver, San Francisco and Seattle. It’s not that far out of the realm of possibility that it could happen again.
The difference now is that the US government has an established program for wealthier would-be immigrants. Its impossible to say if this will attract more Hong Kong immigrants to the US over Canada (which saw more Hong Kong immigrant growth during the 90s). However the real question is what will happen with the protests. Certainly another Tienanmen Square incident is highly unlikely; but will China repeal its election plans? It seems almost as unlikely for an immediate about face.
As protesters continue to remain in the streets long after the planned October 1st deadline, violence by the police is becoming more common. Remember that China is already the number one source of EB-5 applicants. These protests and the accompanying violence are happening in that same country, only in a part that has a free media and the international spotlight. It would seem then that the impetus would be even greater.
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David Guastella is an EB-5 consultant for Guanxi Consultants based out of Chicago, IL. More information on David and Guanxi Consultants can be found here.