Abstract:
This study analyzes the impact of China's Foreign Direct Investment (CFDI) on economic growth
in 11 East African countries over the period 2003–2022, based on the Neoclassical growth theory.
Using panel data econometrics, it compares Pooled OLS, Fixed Effects (FEM), and Random
Effects (REM) models. Although diagnostic tests initially supported the FEM model, the presence
of serial correlation and heteroskedasticity led to the adoption of the dynamic GMM approach.
Results indicate that a 1% increase in the growth of Chinese FDI leads to a 0.027% rise in GDP
per capita in the following year. The study concludes that Chinese FDI significantly contributes to
economic growth in East Africa, supporting policies aimed at attracting and effectively managing
such investments.
