Tensions rise over Nairobi’s China Square shop, as local traders feel the pinch

Samson Kamau was one of hundreds of small-scale traders who converged in Nairobi on February 28 to protest against what they described as unfair trade practices by Chinese investors.

The 35-year-old was angered by a Chinese investor who had opened a retail store in Eastlands, which had become an instant hit for its low-priced items.

“Chinese must leave Kenya, they have messed up our port, taken over the secondhand clothes business and now they have come to the city centre to drive us out of business,” he tells The Africa Report.

“They should restrict themselves to road construction and leave retail business to locals,” Kamau said during the protest in front of the office of the deputy president, Rigathi Gachagua.

His business partner, Festus Kimani, who had carried a banner that read ‘Kenya is not a colony of China’, demanded that the government deport all Chinese nationals engaged in what he calls “underhand business practices.”

“The Chinese cannot be the manufacturers, distributors, wholesalers, retailers and hawkers at the same time. That will only happen over our dead bodies,” said the 30-year-old Kimani.

Riot police

Their demands to speak to Gachagua bore no fruit. They were instead dispersed by riot police after some of them became rowdy.

Since China Square opened its doors in Nairobi earlier this year, hundreds of locals have been trooping to the store to buy goods at knock-off prices.

We opened this store on January 29 this year. In the first two weeks in business, our sales turnover was KSh20m ($156,006).

The store was so popular that it trended on Twitter for weeks and became a topic of discussion on Facebook, as residents shared their shopping experience and encouraged others to visit the store.

In an earlier interview, the director of China Square, Lei Cheng alias Charlie, told the Daily Nation newspaper that the business, which employs 130 Kenyans, raked in KSh10m ($78,003) daily thanks to the increasing number of new customers.

“We opened this store on January 29 this year. In the first two weeks in business, our sales turnover was KSh20m ($156,006).  Nowadays, on a bad day we sell goods worth KSh10m,” Cheng said.

Stiff competition

As Cheng continued to record booming business, his competitors selling similar products in downtown Nairobi were struggling to attract customers.

“We started receiving calls from our customers telling us that they have discovered a store owned by a Chinese national, which sells household goods and other items at cheaper prices and [they would] no longer be buying from us,” says Kamau.

He and Kimani are part of a group of businessmen who source products, mainly household items, from China and sell them locally at a profit.

“Some customers have accused us of exploiting them but this is not true. Our profit margins are not high especially in view of the high cost of living,” Kimani says.

‘Exploiting customers’

However, Cheng maintained that those complaining about his business model have long exploited customers by selling them basic items at a premium.

He defended the business saying the proprietors had met all Kenyan trade laws and had been issued with valid licences by the relevant authorities.

The Kenyatta University-owned Unicity Mall, which houses China Square, was struggling to attract tenants before the Chinese investors came along. However, its fortunes changed when the retail store opened, making the mall one of the busiest buildings in Eastlands.

Following the demonstrations and strong anti-China Square sentiments by some well-connected businessmen, the owners decided to close the store citing security reasons. They however reopened it on 6 March, the same day that the Kenya China Chamber of Commerce released a statement saying an amicable decision had been reached, without divulging further details.

The issue has exposed tensions between local traders and their Chinese counterparts that had been building up since the 2022 general election campaign period.

Anti-China campaign platform

President William Ruto, who was deputy president at the time, and Gachagua, his running mate, campaigned on an anti-China platform promising radical changes if elected.

In June last year, at an economic forum in the Mt Kenya region, Ruto vowed to deal decisively with Chinese nationals taking over jobs meant for Kenyans.

“Chinese nationals are roasting maize and selling mobile phones. We will deport all of them back to their country. We have enough aeroplanes to deport them,” he said, accusing the then- President Uhuru Kenyatta of failing to protect small businesses.

Gachagua made similar remarks and vowed to protect small scale traders, especially those from the Mt Kenya region, “from exploitation by foreigners”.

However, not all Kenyans are against the proprietors of China Square, with some saying Cheng’s business model offers them a major benefit.

‘Half price’

Mary Wairimu, a shop owner in Githurai 44 estate, says she stopped buying household goods from downtown Nairobi the day she learned about China Square on Twitter.

“I used to buy household goods from small traders in the city centre, but not anymore because China Square sells them at half the price,” says the 40-year-old single mother.

The large multi-storey shop could also be having the advantage of buying products in large quantities, which small traders in local markets are unable to do. Kenyan retailers had previously complained that goods they imported from China were taking twice as long as those imported by Chinese counterparts.

Former Kiambu Governor William Kabogo has also defended the Chinese proprietors saying Kenya is a capitalist economy and competition must be encouraged.

“We can’t close China Square on the pretence of protecting local retailers, Kenyans buy commodities at expensive prices. I purchased a cabro brush at China Square at KSh400 ($3.12), which at Gikomba market is KSh950 ($7.42). Who’s fooling who?”  Kabogo said on Twitter.

Government officials divided

The issue has also divided the ruling Kenya Kwanza alliance with some officials pushing for the closure of the store while others support its operation.

Trade Cabinet Secretary Moses Kuria muddied the waters by calling for the closure of the retail store.

“I have today given an offer to Paul Wainainah, the vice chancellor of Kenyatta University, to buy out the lease of China Square, Unicity Mall and hand it over to the Gikomba, Muthurwa, Nyamakima and Eastleigh traders Association. We welcome the Chinese as manufacturers, not as traders,” said Kuria.

However, in a quick rejoinder, Foreign Affairs Principal Secretary Korir Sing’oei dismissed Kuria’s remarks, instead assuring foreign investors of government protection and support.

I […] think that the trade cabinet secretary was wrong on this one. We must be a country that attracts investment.

“No lawful investor irrespective of their nationality should be apprehensive because the country’s investment regime is non-arbitrary and non-discriminatory,” said Dr Sing’oei.

Belgut MP Nelson Koech has commended the principal secretary “for clarifying the government’s position”.

“I […] think that the trade cabinet secretary was wrong on this one. We must be a country that attracts investment. The government promised not to criminalise enterprise,” says Koech, who is also the chairman of the parliamentary committee on defence and foreign relations.

The legislator questions why a similar product sourced in China costs less at China Square than in stores owned by local traders yet they are subjected to the same taxes.

“It means some traders are exploiting customers. We encourage as many Chinese nationals as possible to invest in the country. We cannot say we want to be a competitive country yet we deny foreign investors some rights,” Koech says.

Unfair competition

However, Gatanga MP Edward Mureu says the government must protect local businesses from unfair competition.

“We need to relook at our trade policies since we have a responsibility to safeguard local businesses and also promote industrialisation. Foreigners need to set up investments, but the related supply chain should be left to Kenyans,” Mureu tells The Africa Report.

Political strategist Fred Ogola warns the Ruto administration to tread carefully when handling big economies like China and those in the Western world.

“We might score points domestically in our effort to please certain interests, but we might lose heavily on the international arena if we do not handle trade issues carefully,” says Ogola.

‘Protection of Chinese citizens’

The Chinese embassy has also waded into the matter, urging the Kenya government to protect the legitimate rights and interest of Chinese enterprises and citizens “and create a friendly and inclusive business environment”.

Despite the anti-Chinese sentiments, the Asian country remains one of Kenya’s biggest bilateral creditors whose loans have been used to construct mega infrastructure projects like roads, bridges, modern railways costing billions of dollars.

In addition, imports from China have continued to increase sharply. For example, according to the Economic Survey 2022, the value of imports from China increased to KSh441.4bn ($3.45bn) up from KSh361.4bn ($2.8bn) the previous year – sure proof of the increasing Chinese influence in East Africa’s largest economy.

According to John Charo, a political analyst, the China Square issue is of interest because the Ruto administration is viewed as pro-West unlike his successor Uhuru Kenyatta who developed stronger ties with the communist country.

The Ruto administration is trying hard to develop stronger ties with the Western countries hence the reason why his Trade Cabinet Secretary Moses Kuria is bold enough to c[o]me out strongly against China Square proprietors

Opposition coalition Azimio La Umoja has continuously accused some Western countries of secretly supporting Ruto in the last general election as part of an elaborate plan “to stymie Chinese influence in the East African region”.

“The Ruto administration is trying hard to develop stronger ties with the Western countries hence the reason why his Trade Cabinet Secretary Moses Kuria is bold enough to c[o]me out strongly against China Square proprietors,” Charo tells The Africa Report.

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