The Determinants of China’s Foreign Direct Investment on Economic Growth of Rwanda

Abstract

This study aims to explore predictors of the foreign investment from China coming into Rwanda. One of the components of Rwanda's economy is the investment it receives from other countries. In order to achieve these objectives , the study gathers econometric secondary data from 2007 to 2020 quarterly which were availably provided by National Statistics of China, World Bank, UNCTAD, National Institute of Statistics of Rwanda, and the National Bank of Rwanda. From literature and based on the availability of data, market size, trade openness, infrastructure, and human capital were measured as pre-dictors of Chinese FDI. The data is analyzed using linear regression in Stata. The finding of the study showed that variables have a positive effect on FDI from China, and it found that though FDI had an effect on overall economy of Rwanda, the effect was not statistically significant. The study suggested that Rwanda's policy on foreign investment should aim to attract and encourage Chinese investment to increase the economy of Rwanda. To encourage more FDI, the Rwandan government can offer Chinese investors greater ownership, locational, and internalization benefits. It also should continue to strengthen economic policy transparency since it lowers transaction costs and hence improves incentives for foreign investment.