With those painful memories in mind, many Chinese firms outside the resources sector have taken a cautious approach to overseas forays. China's personal computer titan, Lenovo Group Ltd., recently said it would refocus on the safer shores of domestic markets given its tepid performance in international markets following its takeover of IBM Corp.'s PC business in 2005. In another move, the country's top insurer, Chinalife Insurance Co. Ltd., also recently dropped its offer to buy 49 percent of American International Assurance Co. Ltd., whose parent company, American International Group Inc., nearly collapsed and had to be bailed out by the government.

An earlier report by the international accounting firm PricewaterhouseCoopers LLP indicated that Chinese firms were responsible for 32 cross-border deals in the second half of 2008, representing a sharp drop of more than 45 percent from the first half.

Yet, analysts believe that a new tide of overseas investment is brewing as recessionary fears take hold in Western economies. It is tempting for Chinese companies to snap up beleaguered foreign assets and expand their operations globally as the Western economies hit rock bottom. Many embattled foreign companies are also expecting the cash-laden Chinese to extend them a helping hand. Meanwhile, China is also coming under pressure to use its ever-increasing foreign exchange reserves to support overseas investments, the analysts said.

The government's easier application system will smooth the way for more Chinese firms to build a global presence over the next few years when the world economy starts to find its footing, said Stephen Green, a senior analyst at Standard Chartered Bank (China) Ltd., in a statement. Many of those who had stayed on the sidelines would now ramp up their expansion plans, he added.

A Standard Chartered Bank (China) report forecasts that China's overseas investments will soar to a record $140 billion in 2009.

Chen Deming, Minister of Commerce, publicly encouraged Chinese enterprises to embark on a global buying spree at a press conference earlier this month.

"The financial crisis has offered an opportunity for companies to precipitate restructuring and become global players," Chen said.

In addition to simplifying the application procedures, the MOFCOM also will give more financial support to Chinese companies, such as tax waivers, he added.

Risk aversion

While increasingly recognizing the need to push outbound investment, the Chinese Government has obviously kept a close watch over market risks. The MOFCOM's new regulations stipulate that domestic companies still need its approval for investments in countries that have no diplomatic relations with China or other highly risky countries or regions. Furthermore, overseas investments must not hurt national economic interests, weaken bilateral trade ties or hamper fair competition, the ministry said.

Because it is still too early to tell whether the worst of the global financial crisis is over, the success of overseas expansion by Chinese companies is far from being guaranteed. Cultural differences and misunderstandings in foreign business environments may result in setbacks. Worse still, growing protectionism around the world could thwart any deals before they are completed.

Many Chinese companies harbor ambitions to become significant forces in global competition, but they should have clear long-term strategies based on their realities, said Guo Tianyong, a banking professor at the Central University of Finance and Economics. "The mindset of rushing out for speculation is highly risky given the looming uncertainties over the global economy. They need to be cautious about the seemingly attractive opportunities that may have pitfalls hidden behind them."

Zhang Ming, an economic researcher at the Chinese Academy of Social Sciences, agreed with Guo.

"It's a well-timed swoop for domestic industries to pick up cheap bargains and build up international scale, but they should focus on the less risky sectors in real industries, and not the slippery financial ones," Zhang told Xinhua News Agency. "It also pays off to grab high technologies and global talents through foreign deals."