Chinese foreign direct investments in Kenya's economy, (2000-2010)

Abstract

This Research Project contends that despite the criticism labeled against China's increasing economic and political influence in Africa and particularly against the anticipated negative impact of its foreign direct investments in African countries, it is imprecise to condemn such investments as potentially harmful to an economy such as Kenya's without subjecting them to empirical investigation.

Consequently the study argues that although there are both gains and losses associated with Chinese Foreign Direct Investments, Kenya must continue to encourage investments from China because Kenya's losses from these investments are the result of systemic weaknesses to absorb foreign investments in the Kenyan economy but these weaknesses can be addressed to ensure that the country's economy benefits to the maximum from Chinese investments.

Kenya needs to ensure that all foreign investments including Chinese create linkages with local producers so as. to increase the possibility of technological and skills transfers. Kenya also requires to monitor and regulate the activities of those investments in Wholesale and Retail and Import and Export that compete unfairly with local businesses. The main findings of this study are that Chinese Foreign Direct Investments in Kenya are driven primarily by the motive of seeking markets and secondarily by the motive of seeking resources. Chinese investments were found to benefit the economy of Kenya most through the injection of capital for infrastructural development and the creation of employment.

The investments were however found to perform poorly in technological and skills transfers and the creation of important backward linkages with local producers. In essence the study established that Chinese investments in Kenya contribute considerably to Kenya's economy and should be encouraged.