The attention focused on Chinese outward foreign direct investment (COFDI) is especially high now given the recent 15th China International Fair for Investment & Trade (CIFIT) in Xiamen, Fujian, and the China-Africa Investment Cooperation symposium that was held concurrently.

However, the greater interest in COFDI is fundamentally a result of China's dramatically changing profile as an outward investor. Annual COFDI flows rose from $12 billion in 2005 to $68 billion in 2010 according to a world investment report by the United Nations Conference on Trade and Development (UNCTAD). At present, China is the world's fifth largest outward foreign investor, above Japan and the United Kingdom.

However, there are many anxieties about COFDI, which is often seen as a "harbinger of doom". Specific worries include the impact of COFDI on the developing world, Chinese dominance over supplies of resources, the displacement of local businesses, increased unemployment, and the stripping of technology from acquired firms. Furthermore, some feel Chinese companies abroad are insufficiently attentive to the environment, workers and local customs.

Often, though, such anxieties are based on an ignorance of the facts. For example, while COFDI has hit new heights, China's total stock of COFDI pales in comparison to FDI from the developed world. In addition, there are notable COFDI flows to destinations in the developed world, such as Australia, Canada, and Europe. Chinese firms have not just invested in resources, but also invested heavily in non-resource sectors like banking, electronics, and manufacturing. Moreover, even in places where Chinese firms have invested in resources, they have not just husbanded the production for China, but also sold the supply in the global energy markets.

Aside from these misunderstandings, the potential contribution of COFDI is often overlooked. For instance, Chinese natural resource investments may boost the supply of resources thus decreasing prices. In addition, investments such as Chery Automobile's investment in Venezuela and Geely Automobile Holding's expansion of its operations in Indonesia will inject capital into the local economies, create jobs and boost the two countries production potential and exports. Likewise, Chinese corporate investments in Africa expand the continent's infrastructure, bolster African access to international markets, and make goods available to locals that might not otherwise be affordable.

While it is true that many countries have taken steps against COFDI, the danger in focusing on external barriers is that it may distract attention from other factors that are a greater hindrance to Chinese firms seeking to invest abroad. These factors include inexperience in investing overseas and decreasing high-return investment opportunities in certain sectors. In fact, an increased role for the Chinese government in COFDI could be counterproductive by exacerbating the fears of those who see Beijing lurking behind every Chinese outward investment transaction.

But there are a number of fruitful strategies that the Chinese government can adopt to facilitate COFDI. One would be to develop new initiatives to educate others about the nature of COFDI and its prospective benefits, in order to correct any misperceptions they might harbor about COFDI. Another is to continue stressing that Chinese firms abroad should try to increase local hiring, protect the environment and respect local laws and customs. Attempts to invest in "new" areas are likely to be productive only if Chinese firms are sensitive to host country concerns about land, national security and sovereignty.

Unfortunately, there is much misunderstanding of the actual nature of Chinese outward investment as well as an exaggeration of the strengths of Chinese firms abroad, which are often insufficiently internationalized in terms of staff, assets and sales. Beyond this, there is often a lack of appreciation of the contribution that COFDI can make to host countries, China, and the global economy.

A clearer understanding of COFDI, then, is much needed at a time when China is becoming an international investment heavyweight.

The author is associate director of the Center for US-China Policy Studies and associate professor of international relations at San Francisco State University.