JEFMS Journal

Google Scholar

Article Pdf

---

ABSTRACT:

The essence of bilateral relations to any nation is to offer the country the chance to access resources that are not locally available. China has emerged as a major global power marking an unparalleled presence in the international arena with significant influence in Africa. In Kenya, Chinese imports, Foreign Direct Investments and debts have grown tremendously over the years. Whereas Kenya has experienced some economic growth in those years, it is not yet clear whether the bilateral relationship with China is the cause of this growth. There have been mixed results on the studies done on the implication of Kenya - China bilateral relations on Kenya’s Economic Growth, therefore, calling for further research. The general objective of the study was to determine the impact of the bilateral relations between Kenya and China on Kenya’s Economic Growth, while the specific objectives were to determine the effect of the Chinese imports from Kenya, Kenya’s exports to China, Kenya’s debt from China and foreign direct investment inflows from China on the Kenya’s Economic Growth. This was made possible through the analysis of 32 years’ data ranging from 1990 to 2021 on an annual time series basis. The study employed the neo-classical model of Solow-Swan Theory, supplemented by the Dependency Theory. The study utilized an explanatory research design. The study findings showed that Kenya's economic growth is significantly and negatively influenced by foreign direct investment. Debt had an insignificant effect on Economic growth, Imports had a significant effect on the economic growth and Exports were found to have an insignificant negative effect on economic growth. The study concluded that foreign direct investment has a negative and significant effect on the economic growth, while imports have a significant and positive effect on economic growth. Debt had an insignificant and positive effect on the economic growth, while exports had an insignificant and negative effect on economic growth. The research therefore recommends that Kenya is an import-led growth economy. Therefore, imports from China, especially for capital goods that are used in critical sectors such as industries, infrastructure, and agriculture should be encouraged. By importing from China, a technologically developed country, Kenya benefits by transfer of technology, knowledge and innovations. It is also recommended that the foreign direct investment from China to Kenya need to be monitored and limited. New policies need to be put in place to protect “dumping” and “crowding out effect” as well as protect local industries and artisans working in the informal sector.

KEYWORDS:

Chinese imports from Kenya, Kenya’s exports to China, Kenya’s debt from China, foreign direct investment inflows from China, Economic Growth

REFERENCES:

1) Chami, R., Fullenkamp, C., & Jahjah, S. (2005). Are immigrant remittance flows a source of capital for development? IMF Staff Papers, 52(1), 55-81.

2) Chami, R., Hakura, D., & Montiel, P. (2008). Remittances: An automatic output stabilizer? IMF Working Paper No. 08/172.

3) Cooper, D. R., & Schindler, P. S. (2008). Business research methods (10th ed.). McGraw-Hill.

4) Frankel, J. A., & Romer, D. (1999). Does trade cause growth? American Economic Review, 89(3), 379-399.

5) George, S. (2014). Foreign direct investment and economic growth in Kenya: An empirical investigation (Unpublished master’s thesis). University of Nairobi, Kenya.

6) Harrison, A., & Rodriguez-Clare, A. (2010). Trade, foreign investment, and industrial policy for developing countries. Handbook of Development Economics, 5, 4039-4214.

7) Kenya National Bureau of Statistics. (2018). Economic survey 2018. Nairobi: Government Printer.

8) Kutner, M. H., Nachtsheim, C. J., & Neter, J. (2004). Applied linear regression models (4th ed.). McGraw-Hill/Irwin.

9) Lesutis, G., & Huang, S. (2021). New dynamics of development: The politics of the standard gauge railway project in Kenya. Third World Quarterly, 42(4), 707-724.

10) Mugendi, A. (2011). The impact of China-Kenya economic relations on Kenya’s economy: A case study of the Thika Superhighway project (Unpublished master’s thesis). University of Nairobi, Kenya.

11) Mundell, R. A. (1957). International Trade and Factor Mobility. American Economic Review,, 47.

12) Mwanza, R. (2021). Chinese foreign direct investment and human rights in Kenya: a Mutually-Affirming relationship? Strathmore Law Journal, 2(1), 133–154. https://doi.org/10.52907/slj.v2i1.18

13) Mwita, M. (2020, January 30). Pressure piles on KQ as global airlines suspend China flights. The star Newspaper.

14) Myers, S. C. (1977): Determinants of Corporate Borrowing, Journal of Financial Economics, 5, 147-175.

15) Nayak, R., & Dinkar, A. (2014). Selective Review of Foreign Direct Investment Theories. Asia-Pacific Research and Training Network on Trade, Bangkok: .

16) Newcomb, C. (2020). The impact of Chinese investments on the Kenyan economy. a. https://doi.org/10.36837/chapman.000190

17) Newcomb, M. (2020). The impact of Chinese investments on the Kenyan economy: A qualitative analysis. Journal of Economic Development, 45(3), 123-139.

18) O’Brien, R. M. (2007). A caution regarding rules of thumb for variance inflation factors. Quality & Quantity,41(5),673-690.

19) Oluochi, J. N. (2018). Analysis of the Economic Value of the Standard Gauge Railway (SGR) and its contributions for Kenya. International Journal of Social Science and Humanities Research, 6(2), 740-748.

20) Ombaba, K. M., & et. al. (2012). A Study on the Impact of China's Investments in Africa: The Case of Kenya. Journal of Emerging Trends in Economics and Management Sciences(JETEMS), 3(5), 529-537.

21) Omolo, J., Kamau, P., & Njuguna, S. (2016). Trade and investment relations between Kenya and China: The balance of benefits. African Development Perspectives Yearbook, 20, 113-136.

22) Omolo, M., Jairo, S., & Wanja, R. (2016). Comparative Study of Kenya US, EU And China Trade And Investment Relations. Nairobi: Institute of Economic Affairs.

23) Onjala, J. (2008). A Scoping Study on China- Africa Economic Relations: The Case of Kenya. Research Gate.

24) Otinga, N. H. (2009). The Impact of International Trade on Economic Growth in Developing Countries: A Case Study of Kenya. Nairobi: Unpublished Thesis, University of Nairobi

25) Reinhart, C. M., & Rogoff, K. S. (2010). Growth in a time of debt. American Economic Review, 100(2), 573-578.

26) Sekaran, U. (2010). Research Methods for Business: A Skill-Building Approach. UK: John Wiley & Sons.

27) Siringi, E. M. (2018). Kenya-China Trade Relations: A Nexus of “Trade not Aid” Investment Opportunities for Sustainable Development. Journal of Economics and Development Studies.

28) Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Newyork: MetaLibri DigitalLibrary.

29) Suntikul, W., Tang, C., & Pratt, S. (2016). An Exploratory Study of Chinese Tourists on Kenya Safari Tours. Journal of China Tourism Research, 12(2), 232-251.

30) Temin, P., & Vines, D. (2014). Keynes: Useful Economics for the World Economy. Cambridge: MIT Press.

31) Tourism Research Institute. (2019). Tourism Sectro Perfomance Report, 2018. Nairobi: Tourism Research Institute.

32) UNCTAD. (2019). World Investment Report 2019: Special Economic Zones. Geneva: United Nations.

33) UNCTAD. (2019, June 10). UNCTADSTAT. Retrieved from United Nations Conference on Trade and Development. https://unctadstat.unctad.org/wds/TableViewer/tableView.aspx

34) Wanjiku, M., Mugo, D., & Otieno, J. (2018). The impact of Chinese loans, foreign direct investment and aid on Kenya's economic development from 2000 to 2015. International Journal of Economics and Finance, 10(5), 101-118.