China's outbound investment is set to increase as domestic companies look for overseas opportunities and expand their global presence. But risks still abound, as previous deals have shown.

A report by consulting company Ernst & Young says China's overseas investment will surge to $160 billion by 2020 and the debt-crisis-ridden Europe has become the top potential destination for Chinese investors.

The forecast is in line with official estimation. According to the Ministry of Commerce, China's outbound direct investment in the first half of this year increased 48.2 percent year-on-year to reach $35 billion.

The explosive growth in China's overseas investment is not surprising. Records indicate that when a country's per capita GDP reaches $5,000, there is sharp increase in the number of its enterprises eager to tap business opportunities abroad.

China has crossed that threshold, and as Chinese enterprises get richer their thirst for more overseas mergers and acquisitions will grow.

Since Europe is beset with the debt crisis and its assets are priced relatively low, many Chinese investors have set their eyes on European businesses. The Ernst & Young report, quoting surveys, says Europe would be the most desired investment destination for Chinese investors in the next three years.

Admittedly, the crisis has pushed down the prices of many European assets. But with the crisis still unresolved, it is hard to fathom where exactly the bottom is.

The past has taught harsh lessons to potential Chinese buyers. China's major insurer Ping An Insurance (Group) Company of China Ltd, for example, bought more than 4 percent stake in Dutch-Belgian financial services firm Fortis after the latter's shares had dropped about 40 percent in the previous seven months. Then the deal was hailed as worthy. But the ensuing debt crisis battered Fortis, drove down its share prices still lower and caused serious losses to Ping An.

Cash and ambition alone are not enough to ensure Chinese investors' success on foreign soil. They need to be cautious even if the debt crisis has made many assets in Europe seem attractive, for it is not clear in which direction the crisis will evolve. Investment is a long-term process and the signing of an investment deal does not necessarily mean it will work.

Recent years have seen some successful Chinese trailblazers overseas, but in many cases Chinese investors have failed to achieve what they had sought to because of reckless decisions.

If we fail to learn from such lessons, we may end up paying more in the future.