Impact of China’s Foreign Direct Investment on The Rwandan Economic Growth

Abstract

The purpose of this study was to investigate the exact impact in quantitative terms of China’s FDI on the Economic development of the African continent with reference to Rwanda. The target population comprised 10 staff members of National Institute of Statistics of Rwanda, Rwanda Development Board, Ministry of Trade and Industry, Ministry of Finance and Economic Planning, United Nations (UN) Statistics, and World Bank's World Development Indicators. The sample size was 10 key informants. The researcher used questionnaire, interview guide and desk review as data analysis tools. The SPSS was used to analyze data into descriptive and inferential statistics. Results discover that in Rwanda a foreign direct investment depends on the consumer prices index. The study found out that 54.3% agreed with the consumer prices index, foreign direct investment is influenced by owner-occupiers' housing costs as it was evidenced by 62.8%, it was seen the retail prices index, where 56.7% agreed. Correlation analysis between the Owner-occupiers' housing costs and economic growth show a significant correlation between owner-occupiers' housing costs and job creation (r=.206; p-value=.000). This was statistically correlated given the p value was <0.005 proposing that increase in owner-occupiers' housing costs has led to a job creation in Rwanda. The study demonstrated that 64.6% agreed that the nominal effective exchange influence foreign direct investment, 45.1% strongly agreed with the real effective exchange rate. Correlation results felt that choice of price or cost felt that it is significantly correlated with a growth domestic product (r=0.123*; p value=0.034). The study sought to evaluate the effect of Balance of Trade on the economic growth of Rwanda. The study evidenced that participants agreed that the financial account statements by 55.5% while the study found that capital account is affecting foreign direct investment. It was shown by 53.0%. Results show a significant correlation between capital account and poverty reduction (r=0.105, p-value=0.071). The correlations were statistically significant given that the p value was < 0.05 proposing that an increase in capital account was insignificant with the economic growth and vice versa. The study concludes that inflation rate, exchange rate and balance of trade and thus FDI, have a significance effect on the economic growth in Rwanda. The study recommends that foreign direct investment strategies could be adopted in everyday activities. It would be appropriate to consider most favored nation and trade liberalization and investment as a criteria of exporting companies for improving economic growth. Future research can be conducted using longitudinal research to identify factors which contribute to economic growth. Keywords: Foreign Direct Investment, Economic Growth, Rwanda