What China Inc. wants next

(Fortune) -- For only the second time in recent history, a large, thriving, privately owned Chinese company has stepped up and stepped out -- buying a big brand known the world over.

Six years ago, computer maker Lenovo bought IBM's personal computer business and has struggled to manage it ever since. Now, Zhejiang Geely Holding Co., a rapidly growing Chinese automaker based in Hangzhou, about 100 miles southwest of Shanghai, has bought Volvo from Ford Motor (F, Fortune 500) for $1.8 billion. The Western press, understandably, is full of stories about how, as the Wall Street Journal puts it today, "Geely's acquisition of the Swedish brand is the latest example of how China's economic rise is reshaping large swaths of global business. Its huge market and increasingly powerful companies are playing a growing role around the world in industries ranging from cars to natural resources."

Up to a point, this is true. But only up to a point. To date, China's appetite for foreign assets has been very much focused on natural resources -- oil in Africa, copper in Peru, etc. -- which, for the most part, means the deals are done in the developing world (that's where the natural resources tend to be).

These are deals, further, that are done by state-owned oil or resources companies. They are, literally, China Inc. They are huge and are backed by state-owned banks, and partly for that reason, some analysts argue, China has tended to overpay for what it wants. (When CNOOC, the state-owned oil company, was shopping for oil reserves in Nigeria last year, it was offering sums that were multiples of what existing license holders, Exxon Mobile (XOM, Fortune 500) and Royal Dutch Shell (RDSA), were willing to pay, prompting one government official to exclaim: "we love this kind of competition.")

But whether Chinese firms have been overeager buyers or not, these are still the kind of deals that will continue to drive China's overseas direct investment. And a big part of the reason for that is -- lest we forget -- China is only in the process of developing the type of companies that are at all comfortable managing assets in competitive markets in the developed world.

China's growth has been so consistently explosive over the last two decades that it's easy to forget that. But the hype surrounding the country's global clout can get out of hand.

As Edward Tse, the head of China operations for the global consulting firm Booz & Co. recently told Fortune, "We're expecting too much to think that after, say, a deal for Volvo, there will be a whole wave of similar type investments."

No, Tse and others argue, you can count on one hand the companies in China that are comfortable even thinking about such a thing. Appliance maker Haier; Lenovo. Maybe telecom giant Huwawei (which was rebuffed by the U.S. government when it tried to buy 3COM (COMS) in 2008). Now throw in Geely in automobiles. But beyond that, it's slim pickings.

Remember: China now is not Japan of the early 1990s, when a strong yen prompted a surge in FDI. Japan had companies that were already well established globally, brand names that evoked quality. Even if the renminbi begins to strengthen again against the dollar later this year -- as it probably will -- China's not there yet; it has only been 30 years, after all, since Beijing reopened to the world economically. "This is going to take some time, probably 10 more years," says Tse. "We're expecting too much to think it will happen a lot sooner than that."

Beyond commercial immaturity, there is also another reason why, for now anyway, the developing world is still China's principal comfort zone when it comes to investing abroad. And that is, deals tend to be scrutinized more in the West, by both competitors, politicians, and the press. When CNOOC tried to buy Unocal several years ago, one of the issues that arose was the subsidized finance the Chinese company was allegedly getting to do the deal. Did that not put potential bidders in the West at a disadvantage?

Similar questions -- if anyone now cared -- could apparently be asked of the Geely-Volvo deal. The financing details are still murky, but according to Chinese press reports, it appears that at least part of the $1.8 billion purchase price -- perhaps as much as $500 million -- will come from loans backed explicitly by municipal governments in China that will be home to some new Volvo production facilities. Another $1 billion will come from the state-owned Bank of China. It's not clear what the interest rate on that loan is.

Geely, remember, is not a state-owned company. But in China, given its stage of development, those distinctions become pretty muddied. Few in the outside world care in this case, though; the politics have been stripped from this deal, because it's one that an eager seller (Ford) wanted. (How eager? It paid $6.45 billion for Volvo in 1999.) The Swedish town of Gothenborg, home to Volvo, one of Sweden's industrial crown jewels, no doubt wanted it even more. Better than getting shut down entirely, and it's not clear that a lot of other buyers were willing to step up. So Geely, which makes low-end small cars in China, wins what it hopes will be a prize, and gets to move up-market with a classy brand.

But China's leadership -- both in government and in the private sector -- understands that this was a relatively unique situation. The day is coming when cross-border deals like this, involving Chinese buyers and big, iconic western sellers, will be common. But we're not quite there yet.