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Working Paper

Deal or No Deal : Strictly Business for China in Kenya?

TERRORISM BASIS POINTS CURRENCY APPRECIATION EQUIPMENT DEVELOPMENT ASSISTANCE LOCAL CAPACITY PRODUCTION STOCK GLOBAL MARKETS INCOME INTEREST PERFECT COMPETITION GUARANTEES INTEREST RATE INTERNAL AUDITS EXCHANGE TREASURIES CONSUMER GOODS GDP PER CAPITA DOMESTIC MARKET EXPORTS ELASTICITY POLITICAL ECONOMY EXPORTERS ECONOMIC RELATIONS WELFARE BONDS MIDDLE INCOME COUNTRY LOAN DISTRIBUTION CAPACITY BUILDING VARIABLES BORROWERS TRADE SECTOR TAX INPUTS PAYMENTS INTERNATIONAL BANK TRENDS ECONOMIC OUTLOOK CENTRAL BANK DEVELOPMENT FOREIGN MARKETS LONG-TERM DEBT INFLUENCE TRADE BALANCE OIL PRICES SAVINGS CREDIT RATINGS PER CAPITA INCOME COSTS CURRENCY EXPORT GROWTH TELECOMMUNICATIONS INCOME GROWTH RENT CONTRACTS TRADING INTEREST RATES INDUSTRIALIZATION CRITERIA NET EXPORTS MARKETS DEBT WTO RETURN INCOME LEVELS TRADE POLICY LOANS DIRECT INVESTMENT ELASTICITY OF SUBSTITUTION INVENTORIES UTILITY NATURAL RESOURCES NATIONAL TREASURY RULE OF LAW COMMODITY PRICE TAXES MICRO ENTERPRISES EXPENDITURE DEBT LEVELS CREDIT LINE INTERNATIONAL STANDARDS EQUITY SAVINGS RATES INVESTORS CONSUMPTION VALUE ADDED GOOD ECONOMIC PERFORMANCE CAPITAL WAGES INTERNATIONAL TRADE TRANSPARENCY SOVEREIGN RISK ECONOMIC_RELATIONS EXPORT COMPETITIVENESS TURNOVER FUTURE SAVINGS RATE VALUE COMPETITIVENESS FOREIGN DIRECT INVESTMENT RETURNS CREDIT MACROECONOMICS DEVELOPMENT STRATEGY FOREIGN INVESTMENT DEMAND UTILITY FUNCTION SHARE OF INVESTMENT ECONOMY CONSUMERS PROPERTY EQUITY STAKE ACCOUNTANT REAL EXCHANGE RATE MARKET ECONOMIC THEORY FOREIGN EXCHANGE RISK MANAGEMENT SYSTEM PUBLIC DEBT EXPORTER TREASURY HOUSEHOLD SAVINGS INSURANCE GOVERNMENT POLICIES TRADE GDP INVESTOR GOODS THEORY MARKET SHARE SECURITY ECONOMIES OF SCALE DURABLE GROWTH RATE BILATERAL TRADE INVESTMENT EXTREME POVERTY SOVEREIGN BONDS SHARE COMPARATIVE ADVANTAGE INVESTMENT CLIMATE TAX SYSTEM POVERTY TARIFF POOR CREDIT RATINGS COMPETITIVE MARKETS DECENTRALIZATION BID REVENUE INVESTMENTS RISK MANAGEMENT MONOPOLISTIC COMPETITION EXCHANGE RATE PRICE CONTROLS CAPITAL INVESTMENT COMMODITY PRICES DURABLES GROWTH POTENTIAL POSITIVE EFFECTS PRICES DEVELOPMENT BANK PRODUCTION COSTS DEVELOPMENT POLICY COMPETITION FUTURE RESEARCH INVESTING
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World Bank, Washington, DC
Africa | East Asia and Pacific | China | Kenya
2016-04-26T17:05:29Z | 2016-04-26T17:05:29Z | 2016-03

Existing work on China's economic influence in Africa refers to Africa in broad terms, thereby generalizing the results to an extent that is unhelpful for policy-makers in a specific country. Moreover, the emphasis is on oil exporters. This paper remedies this by focusing on a single, oil-importing country: Kenya. The paper examines China's economic presence in Kenya and some of the popular myths surrounding Chinese economic activity. The first myth is that Chinese companies do not employ local workers. In fact, 78 percent of full-time and 95 percent of part-time employees in Chinese companies are locals. Second, although China represents a large potential market for local exporters, the study finds that China has a better chance of expanding its exports to Kenya than Kenya does to China based on existing specializations. This may change with recent oil discoveries in Kenya, increasing the space for Kenyan exports to China, as well as from China's shift to a consumption-driven economy which will increase demand for services, a growing strength of Kenya's economy (World Bank Country Economic Memorandum 2016). The paper emphasizes that Kenyan policy makers should be less concerned about bilateral trade imbalances and worry about Kenya's overall trade balance. However, the Standard Gauge Railway and Thika superhighway experiences suggest that Chinese firms offer relatively few technology transfer or supplier opportunities for local firms and academia. Third, the popular focus of Chinese competition is on the impact on well-organized Kenyan producers and not on consumers, thereby underestimating the benefits Kenyan consumer derive from the availability of more affordable Chinese goods. The paper concludes with policy directions for improving export competitiveness and transparency in infrastructure projects, and local content.

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