East or West ? Comparing China, US and EU Policy, Trade and Investment Relations With Kenya

The question of East or West, is more of a political debate than an economic one. China, EU and US are development partners with unique opportunities, which cannot be easily substituted by other development partners. Each partner operate and pursue economic diplomacy by means of a policy framework. Kenya is having a growing negative trade balance with China, however, Chinese FDI inflows have strong correlation with the country’s GDP growth. A review of statistics for the last three years shows that the UK FDI inflows to Kenya and the corresponding stocks have been increasing. However, the FDI stock has a stronger correlation with Kenya’s GDP growth as compared to the FDI inflows. The US FDI inflows are lower than those of the Chinese and the UK. These inflows are negatively correlated with Kenya’s economic growth, and while the FDI stocks positively influence economic growth. Even though China is becoming a major development partner, there are concerns over whether there will be mutual benefits for both countries in the partnership. Secondly, there is the risk of stagnation in policy reforms especially where the partnership with China is geared towards achieving certain sociopolitical outcomes that do not have an overall positive effect in the economy. Lastly, there is a major concern for technology transfer amidst the growing Chinese FDI stock in Kenya.