Los Angeles, CA – China attracted $71.1 billion in foreign direct investment from January to July, down 0.4 percent on the same period in 2013, with FDI in the country reaching $7.8 billion in July alone, the first decline in overseas capital inflow in 17 months.

The slashing of spending in China’s manufacturing sector by companies from the US, Japan and the European Union is being blamed, primarily, on an increase in Beijing’s recent crackdown on foreign companies alleged to be engaging in “anti-competitive” business practices.

Over the past year, China has taken action against a number of ‘big ticket’ foreign companies, accusing them of breaking the country’s anti-trust regulations, which many feel are opaque and in violation of World Trade Organization rules.

Most recently luxury car brand Mercedes-Benz has been accused of manipulating prices for after-sales services in the country, while Beijing has imposed fines on milk powder companies including Mead Johnson Nutrition Co and Danone SA, alleging breach of its anti-monopoly laws.

China has also launched a probe into US-based Microsoft and chip maker Qualcomm over anti-trust claims, while several pharmaceutical companies including GlaxoSmithKline are facing probe in the country over alleged corruption and price fixing.

The probes have raised concerns among foreign investors that the country is targeting foreign firms operating there in an effort to, as one source out it, “flex its muscles.”

According to the Ministry of Commerce in Beijing, though, the anti-trust investigations aren’t responsible for the drop in FDI. Instead, the agency said, the “volatility of FDI” is a natural reaction to the country’s “efforts to balance the economic structure.”

The monthly decline “is not sufficient enough to reflect the general trend. It must not be linked to the anti-monopoly probes into some foreign invested companies or be associated with other baseless speculations,” said Commerce Ministry spokesman Shen Danyang.

“All market players should operate their business according to the law,” he added. “They should be punished according to the law and be subject to appropriate legal penalties if they violate the law.”

Beijing, he said, “expects foreign investment to keep a steady growth in the coming years and total FDI in 2014 to remain at a similar level with last year.”

08/21/2014