China's overseas direct investments (ODI) are growing at a fast pace: Companies like Lenovo, TCL and Geely have earned a global reputation through their overseas acquisitions while other Chinese companies, like Huawei and Haier, have successfully expanded abroad through organic growth. And nowadays every major cross-border deal sees the involvement of at least one Chinese bidder. This trend is a very positive one because it shows the willingness of many Chinese companies to go beyond a low-cost strategy in order to build lasting competitive advantages based on innovation and differentiation.

But a few high-profile deals should not overshadow the fact that the globalization of Chinese enterprises is still a process in its infancy. In fact, China's greatest amount of ODI still goes toward other emerging countries, while Chinese investments in Europe and the US play a very limited role. This implies that Chinese companies have not been very effective in acquiring companies with advanced technology, brands and know-how or in penetrating developed markets. And the more active Chinese companies become in Europe or North-America, the more concerns they raise among the public opinions of these countries, which see the eastward shift in economic power with growing apprehension.

Even the availability of many Chinese companies to pay a premium in bidding for foreign firms is often ineffective. In fact, Xinmao recently failed to get control of the Dutch cable maker Draka despite the fact that its offering price was higher than the one proposed by the Italian Prysmian, which won the bid. Similarly, Bright Food was not able to secure the control of Yoplait, which went to the American General Mills, notwithstanding its higher bid for the French dairy company.

These setbacks indicate that it will take time for Chinese companies to fulfill their global ambitions: Chinese enterprises are still relatively young compared to their rivals and their brands are often unknown to Western consumers, while the senior managers of many Chinese companies lack overseas experience. In addition, the often opaque corporate governance rules of many Chinese private companies and the perceived role played by the Chinese government in support of Chinese SOEs contribute to the lack of trust among Western potential target companies.

For these reasons, it is crucial for Chinese companies investing overseas to have a clear understanding of their strengths and weaknesses and to define their strategies accordingly. For many companies still fighting to increase their market shares in the domestic markets, going global can be a risky and costly detour, capable of weakening them against local competitors.

Other companies, already leaders in the domestic market, should look abroad but be flexible in their approach to foreign markets. In fact, for many inexperienced players cross-border acquisitions could be too difficult to pull through and manage afterwards: The formation of strategic alliances and joint ventures with foreign partners could be valid alternatives in many situations, allowing Chinese enterprises to achieve their goals while narrowing the experience gap.

When a full-blown acquisition is pursued, the Chinese company should have good understanding of the target, its stakeholders and the political and social environment in which the deal will take place: A viable business plan for the target should be laid out and assurance should be given to concerned labor unions, investors and local authorities that the main goals of the Chinese company are not asset stripping and labor-costs reductions.

Foreign advisers with knowledge of the local market should be retained to help navigate the company through the difficult acquisition process. Corporate governance rules in line with international standards and transparency in accounting practices should be established and maintained. In addition, Chinese companies with lack of managers with international skills should make sure to acquire a target with a good management team in place, it being unrealistic for the buyer to replace it in the short-medium term with Chinese executives. The target firm should be given high autonomy and the value of the foreign brands should not be diluted by mixing it with the weaker Chinese brand.

Chinese companies will increasingly invest overseas. In doing so, they should not forget that entering new markets and managing cross-border acquisitions are key strategic decisions and very difficult ones. Going global represents the ultimate test for a company with the ambition to be an industry leader, one that requires a sound strategy and skillful implementation skills.

The author is professor and associate dean of the International Business School of Beijing Foreign Studies University and visiting professor at the Peking University School of Transnational Law.