ENTREPRENEURSHIP: A New Pathway for Chinese Entrepreneurs

Known as the land of opportunities, US has long been one of the most popular places among immigrants from all over the world, especially China. With multiple non-immigrant visa options, experts from law firm Withersworldwide provides the best solutions for the new startups searching for new opportunities

By Christina Choi


Embassy of the United States in Beijing says the US and PRC agreed on extending short-term visas for business, travel and study purposes, starting from November 12, 2014. Business and tourism visas known as B1 and B2 have been extended to ten years multiple entry program and five years for student visa program, respectively. The two largest economies look forward to growing business opportunities and economic development upon this new adjustment.

This is good news for Chinese national entrepreneurs and start-up to explore Silicon Valley, one of the hottest places for foreign businessmen. It is the center of leading technology of the United States that attracts numbers of investors, venture capitalists and engineers.

A 20-year-old Chinese student went to seek help from Reaz Jafri, head of immigration at the law firm Withers. With his Masters degree in hand, the young man was in the middle of PhD program in the United States. Yet, he chose to drop out and decided to push forward his American dream – starting a business in the US.

However, he was in a difficult position with F1 student visa. Having realized his extraordinary ability in the business field, Jafri filed an O-1 visa with the U.S. government. Initially the U.S. government denied the application because the applicant lacked a strong track record.

But with an additional appeal, Jafri was able to receive an approval. Today, the young Chinese man is selling robots to US companies for US$150,000 each, with huge interest from private equity funds and strategic buyers to buy his company. He made a great transition from a drop out student to a CEO with 100 million dollars in a matter of nine months.

Mark Lanning, Director of Immigration, Withers
Mark Lanning, Director of Immigration, Withers

Likewise, both Jafri and Mark Lanning, Director of Immigration at Withers, have been providing information on business opportunities. Y Combinator is one of the start-up incubators in Silicon Valley that has been supporting startups since 2005. With more than 1,600 founders, it provides financial support and additional resources for entrepreneurs to develop their ideas into practices.

However, most people have never heard of this organization. “The government is catching up to it but it’s really cutting edge. The type of solutions for the entrepreneurs is unique. That’s what Reaz and I are trying to provide,” said Lanning.

“There is a culture out there of breaking all the rules in business and a sense that anything is possible,” said Jafri. By embracing innovative ideas and cultures to make its environment more mature and conducive, Silicon Valley provides multiple resources particular to technology and strong patent protection, Jafri added.

“There is a certain combination of the world’s biggest market size of technology and the ability to monetize and commercialize technology,” said Lanning. With this great nexus funded by big corporations such as Airbnb and Linkedin, Silicon Valley is an influential boot camp for the next major entrepreneurs to grow.

Why Invest in the US?

Lanning says most of the Chinese entrepreneurs are coming to the US for further business opportunities but not for gaining permanent residency. Along with the globalization, people expand their business opportunities in different areas without staying in one specific place. “It’s not that they are leaving China. A lot of them do go back and invest in China, maintaining property and connection with China. The world is just becoming smaller for them,” said Jafri.

Reaz Jafri, Head of Immigration, Withers
Reaz Jafri, Head of Immigration, Withers

When both Jafri and Lanning spoke at the HKUST few weeks ago, they said there was eagerness amongst students who want to organize and build their own companies. But the resources given in Hong Kong are not as much as compared to what California or New York to offer, said Jafri and Lanning.

“In the long run, places like Shanghai, Shenzhen and Hong Kong will be incredible centers for innovation,” said Jafri. “But chances of success, finding a partner are just much higher in the United Sates.”

US has been the largest beneficiaries of foreign direct investment since 2006. With the inflow of foreign direct investment, the country has seen growing competitiveness in market and creation of high paid jobs. According to a survey conducted by the Organization for International Investment (OFIT) and Pricewaterhouse-Coopers LLP in 2014, more than half of the global enterprises showed their interest in expanding its US operations and employment. “There are tremendous benefits,” said Jafri. “If you look at the biggest companies in Silicon Valley, they are founded by entrepreneurs from other countries. The companies create lots of jobs and values with the shareholders.”

Type O Visas

Once people figure out how to launch their companies after touring US, the next question becomes how they stay in US. The Chinese applicants seek for green cards most of the time, but because of the limited US immigration quotas and long process, Withers sometimes suggests nonimmigrant visas, especially Type O visas.

Type O Visas are applicable to the people with extraordinary ability in various fields. As long as the individual can prove one’s ability and file to the department, he or she can receive O visa and head to US immediately. But because the US government has been dealing with big enterprises, individual inquiries for type O visas are still under the radar. “The whole landscape is changing so fast that I don’t think a lot of governments have caught up to it including the way the visa officers might look at the case,” said Lanning.

What’s more striking about the O-1 visa is, it is approved for the first three years and can be extended indefinitely. Besides, there is no limited annual quota that can be issued for O-1 visa. Around 10,000 people have received O-1 visa in 2014. For people who come to US solely for the business purposes, O-1 visa is highly recommended as getting green cards means paying taxes on their worldwide income.

If the company grows to a certain scale outside of the US, it can even transfer people if they have enough subsidiaries in the US. The process takes a couple of months and it is possible from that visa to apply for green card within a year.

EB-5 Visa

EB-5 is one of the most popular visas among the Chinese applicants. First introduced in 1992, the visa was created with the purpose of increasing foreign direct investment. Today, applicants can receive green cards by investing at least $500,000 to projects in rural areas and creating 10 jobs. According to the State Department, EB-5 Visa hit its maximum quota of 10,000 last summer. They expect this year’s quota will be reached even earlier, around May.

As soon as quota is reached, the US government issues the EB-5 visa based on the applicants’ nationality, which is called retrogression. To elaborate, once the Chinese applicants exceed their quota, the opportunities are given to other nations which have not exceeded their own quota. Jafri says waiting for two to three years is optimistic while waiting for another four to five years is more of a realistic view. Finally, EB-5 is not a preferable option for some start-up founders, because a green card can create U.S. tax obligations sometime as high as 55 percent.

Yet, a number of Chinese citizens are not aware of the alternative options like type O visas because agents and attorneys are not talking about them. Jafri says it’s because people are making more money without extra referral fees with EB-5. They can easily pitch their business ideas in a conference and start making revenue.

But when a lot of people get green cards through EB-5, they often forget about the high taxation rules. Both Jafri and Lanning have encountered clients, who got green cards via EB-5 visas, seeking advice on their wealth planning.

“For international investors that are interested in big infrastructure types of opportunities, China is a better option. In the case of technology and bio engineering, US has been doing them longer and there is a certain amount of predictability and strong US legal system to protect the patent. It’s just a different ecosystem and culture that’s embracing it,” said Jafri.

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