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Is China starting a new era of corporate crackdown?

GlaxoSmithKline Shanghai headquarters
Peter Parks | AFP | Getty Images
GlaxoSmithKline Shanghai headquarters

High-profile actions against Western companies in China in recent months suggest the world's second-biggest economy is starting a new era of toughness on corruption, possibly ignited by last year's change in Communist Party leadership.

The apparent crackdown has hit some of the West's biggest corporate names. Pharmaceutical giant GlaxoSmithKline is under investigation over corruption allegations and Nestle and Danone cut the price of their infant milk formula after a government investigation into alleged price fixing.

(Read more: New Chinese milk scandal - this time with a Western culprit)

"There has indeed been a sharp acceleration of such cases being launched by the government," analysts at Bank of America Merrill Lynch wrote in a research note.

"There can be many reasons behind this, in our opinion,including addressing social tension and trade negotiation tactics. Anyhow, we suspect that this is not a short-term phenomenon and there may be more cases launched."

China is less dependent on foreign investment after a period of strong economic growth.

The changing of the guard in Chinese officialdom, after Xi Jinping took over as leader of China and the Communist Party last year, has left some Western companies in trouble as the people they have established relationships with fall from power.

"Sometimes foreign companies make the mistake of thinking that it's all about relationships in China, when in fact there's much more," James Roy, senior analyst at China Market Research Group in Shanghai, told CNBC.com.

"There has definitely been a big pick-up in the last 12 months and the government has made a big push to limit corruption. This started at the level of officials and increasingly extending to specific industries."

There is also increased pressure from the emerging Chinese middle classes to see the government taking action on corruption.

This is coupled with Chinese consumers often mistrusting local brands in favor of international names. When a scandal has tainted foreign brands, for example in the case of infant milk powders, one effect has been to boost local producers.

Around 60 percent of the most high-profile anti-corruption cases against foreign companies are motivated by the need "to calm public sentiment," with 10 percent made to lower prices, according to BAML analysts.

(Read more: Why Glaxo's China scandal needed to happen)

Pharmaceutical industry sources told CNBC that GSK may be unfairly targeted over practices also used by other companies in the industry.

"There has always been greater scrutiny on foreign entities than domestic, but there's more pressure coming through now," Roy said.

Follow us on Twitter: @CNBCWorld

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