Africa falls in love with China’s deflation, as US dreams America first

In 2020 America’s premier retail store Walmart chain finally landed in Kisumu, the heart of East Africa, when they set up shop in Mega City Mall.

The Americans, typical of their multinationals, entered Kenya through their web of subsidiaries, more specifically Game Stores, a South African retail chain owned by Massmart which is in turn owned by Wall Walmart International.

Where American diplomacy had waned, at least business was surging forward deploying better technology, more efficient supply chains, and economies of scale that would collapse local competition on its sheer weight. 

However, just two years later Walmart was re-evaluating its African business and opted to withdraw the franchise from markets across East and West Africa because the ventures ‘did not deliver a meaningful outcome’ for the Americans.

Read Also: Year of the snake, Chinese lessons on living in post-Americana

It may have been a case of bad timing; the impact of the Covid-19 pandemic, subsequent supply chain dislocations, and currency volatility that has followed geopolitical uncertainty, but the Americans cut and run.

The mass exit from Africa has seen American multinational consumer goods manufacturer Procter & Gamble (P&G) leave as well as GlaxoSmithKline, Kimberly-Clark, and recently Black Rock, even as we expect further exits to America’s capital markets on Trump's policies.

Enter the dragon

Meanwhile, in China, goods were falling off factory shelves with no one to pick them up due to an oversupply of productivity with low consumption due to Covid-19 extended lockdown and the traditional culture of thrift.

China plunged into deflation at a time when America and the rest of the West had just gone into inflation, meaning for Africans it was cheaper to buy Chinese, only if you could go around the issue of the dollar. And this is where Chinese stores fancied they could come in.

Chinese stores fancied they could sell in the Kenyan market and over the last few years Kenya has seen an explosion of their outlets. China Square, the market leader now owns six outlets in Kenyatta University, Langata, Two Rivers, Water Front in Nairobi, and an outlet in Mombasa and Kisumu as well. Other Chinese retailers including Panda have opened an outlet in Garden City while Love Home Mart has opened up shop in Roselyn Riviera.

Initially, The idea of China Square faced resistance in Kenya when the then Kenya Kwanza Trade Minister Moses Kuria tried and failed to shut down the first China Square store in Kenyatta University.

But today, the locations of the stores are contested as they become the only ones expanding when locally owned stores are shutting down.

When we moved to Kisumu last year, we tried to set up an office at Lake Basin Development Authority (LBDA) mall and their biggest selling point was that soon, the location would host China Square.

Instead China Square set up shop in Mega City Mall and immediately the parking lot was full to the brim, and you had to go around looking for space, you could not believe it was once mostly vacant.

Ms Wambui Mbarire, CEO of the Retail Trade Association of Kenya (RETRAK) says Kenyan attitudes towards the Chinese store has changed dramatically and no one seems to mind them anymore.

“There are no complaints about the growth of the Chinese stores, it is like we have learned to live with them, she said.

Those who were losing out, she says were the Kamukunji traders who had based their business model on going to import fast moving consumer goods from China.

Substitution

Over the years, the Chinese had studied Kenya’s Kamukunji and Nyamakima traders going into their country to import cheap consumer goods and retail the same here at twice, or thrice their actual price.

The Chinese presence had also been growing in Kenya, especially over the construction of the Standard Gauge Railway where Chinese companies imported labour, some of who settled behind. The growing number of Chinese taking over Killimani neighbourhoods coincided with their rise in local businesses especially dominating the retail trade of electronics on Luthuli Avenue.

Now they felt confident of the growing Chinese influence to bring goods directly to locals without middlemen, significantly lowering the prices of consumer goods.

Backed by deflation, cheaper Chinese goods have flooded the market with China Square opening six branches at a time almost all leading retailers sourcing goods from the West are losing market share and closing outlets due to falling consumption and higher prices.

Ms Mbarire says the beneficiaries are the hawkers and village retailers who can now go directly into Chinese shops and get bargain prices. “You can see that hawkers and the up-country retail traders are now going for the goods directly to get the goods from the Chinese,” she said.

It is not just the importers that are losing out, local manufacturers and even American multinationals are facing a generational shift in brand loyalty.

“It is not just the local manufacturers that are losing out, I would say anyone who is not able to compete effectively in price will lose. The determinant may come down to quality but given the fact that money is also pretty tight people are going for the best price than quality,” Ms Mbarire said.

Saving America

For many years, USA has sold the world the myth of American exceptionalism, which was backed by the Bretton Woods system that allowed them to print money as the world’s reserve currency and fuel the growth of their multinationals across the world.

The Chinese upended this myth with the simple function of currency controls, higher savings, and productivity that is threatening to dwarf America. In a panic, the US empire has gone on an overdrive to try and flog the rest of the world into believing American exceptionalism still exists.

President Trump wants to use tax incentives to prop the lost exceptionalism and deploy tariffs to make it expensive to manufacture in other markets.

The new president has promised to cut taxes on the rich multinationals, lower energy costs, and cordon off the American market exclusively for those who will shift their manufacturing base back to the US.

For those operating overseas, America has promised to give them protection over taxation in the markets they operate in by blowing up global consensus on clamping down on offshoring and tax avoidance.

In its statement, the Tax Justice Network said Trump ‘plans to question the right of any country to tax American multinational corporations and is threatening to take countermeasures against countries that do not, in effect, cede their tax sovereignty over US multinationals operating within their own borders.’

The exceptionalism, thus regained would draw back companies to manufacture in America where he has promised massive tax cuts and a golden shower of cheap US shale oil, while the tech-feudals who were being threatened by a 15 percent global tax on the profits they were making taxing e-commerce traders abroad would most importantly be protected, securing the future of the empire.

If Trump’s strategy works, businesses will flock to America and produce there, enjoying ‘among the lowest taxes of any nation on Earth’ as President Trump has promised. However, countries that are about to be thrown into the USAID chaos may just seek alternatives away from America.

America first or America last

The famed genius of American deal-making in popular culture is the badass image of Pablo Escobar offering the choice of silver or lead, an absolutist view of life where the weak acquiesce to the strong man and get a cookie, or if they choose not to, they die.

It is ominous US President Donald Trump seems to see the world through these Escobar-esq lenses as he threatens to freeze foreign aid funding for the next 90 days in order to re-establish America’s political supremacy.

Despite such attitudes and assumptions that America brings to the negotiating table, the reality is that unlike in the movies, in International Relations too many forces are constantly at play, and that no single entity can determine cause and effect.

President Trump may have set off a powder cake of instability that cannot be put back in a box, and has effectively opened up the world for alternatives.

But by freezing USAID across the world affecting the operations of PEPFAR and in many cases access to HIV treatment, America has shown it is willing to watch the citizens of its vassal states starve and die in order to scare them from taxing US multinationals.

His belief that three months of contemplating the impact of the withdrawal of American benevolence will have countries crawling on their knees, begging to sign up to any lopsided deals in favour of the US, may just have the opposite effect.

Nature and vacuums

This policy may be mistaken in a rapidly evolving multipolar world where other countries such as India and China are quickly providing alternatives while the European Union is restituting to compete with rather than compliment the United States.

China is quickly offering that alternative by providing Russia with the banking system technology that replaced America after they withdrew its Swift banking system in a deluded attempt to collapse Russia economy at the start of the Ukraine conflict.

The Chinese have also broken American dominance in technology launching Deepseek, a rival for the US backed Artificial Intelligence options which the Chinese created at a fraction of the cost and which has quickly become the world most sought after application.

The irony of President Donald trump launching $500 billion investment to build Stargate, Sam Atman’s fantasy  of the brute-force that will power American AI revolution, was not lost to investors who were dumping Nvidia stock after Deepseek revealed you do not need brute-force for AI.

China’s model may beat the capitalistic attempt by America to hoard hardware and AI code with rivals like Deepseek opting to go open source with the potential to grab entire global markets to build on their code.

African social media

If western media would have reported the hacking attack on Deepseek, they would not have called it- DeepSeek hit with ‘large-scale’ cyber-attack after AI chatbot tops app stores; as they actually did this time. It would have been all about Chinese corporate espionage trying to bring down American Capital.

Only this time it is the Americans doing the hacking and the banning. There are already memes that America will ban Chinese AI as it continues on a trend of boxing itself into obsolescence after expelling Tik-Tok.

It is for the very reason for banning Tik-Tok and China’s for blocking Google that Africa has no alternative but to build its own social connectivity platforms, in this age of behavior modification and technofuedal systems charging cloudrents.

In the era where you can ask AI to write code and build websites, where undeveloped intellectual property allows you to use multibillion dollar models to produce new companies, this, coAfricans can't surely be rocket science.