Author: Aleksandra Gadzala.

China's engagement with African countries is growing rapidly, spanning trade, aid and investment. While speculation remains over the opportunities and challenges China brings to the continent, some observers have suggested that capital inflows from the Chinese may foster sustainable economic development in the region. The majority of such claims, however, remain rooted in assessments of “globalization from above,” with little regard for the rapid rise of Chinese small and medium enterprises (SMEs) among many of Africa's informal economies. Drawing on case study data from Kenya, this paper argues that rather than large scale investment and aid projects, it is this proliferation of Chinese entrepreneurship that carries the greatest ramifications for Africa's economic development, with mixed results. The analysis first explores the social and economic organization of overseas Chinese enterprises, and the centrality of Kenya's informal sector – the jua kali – for the country's economy. It proceeds to examine China's engagements with Kenya, both in terms of trade and investment, and the emergence of Chinese SMEs in the informal sector. The article argues that the distinct nature of Chinese business networks endows them with significant competitive advantages over their Kenyan counterparts. Unlike the structural integrity maintained by Chinese networks, ethnic cleavages preclude effective coordination among Kenyan SMEs, in turn rendering them unable to parry market competition brought by the Chinese. The general picture is thus one of Kenyan entrepreneurs struggling to sustain both their enterprises and livelihoods. Such factors have thus far failed to enter studies on the implications of “China-in-Africa.” Yet it is precisely the rise of Chinese SMEs in Kenya and elsewhere that presents the most significant challenges for economic development in the region.