CHINA is the world's sixth-biggest international investor, but you wouldn't know it from the cold shoulder Chinese entrepreneurs often get when trying to spend money on overseas projects.

Take the example of Beijing Zhongkun Investment Group, a property developer that has expanded into tourism.

Early this month, the government of Iceland agreed to allow the company to lease about 210 square kilometers in the northeast of the island to build a resort, according to foreign media. The lease was originally set at 40 years, but there are indications that term can be increased to 99.

Still, the deal ended up a far cry from Zhongkun's original proposal to buy 300 square kilometers of land for US$8.8 million.

Foreign countries that say they want Chinese investment come up with all sorts of reasons for rejecting it.

State-owned enterprises like China National Offshore Oil Corp often find their investment plans knocked back because of their state-owned origins.

Even a private company like Huawei Technologies was recently snubbed in Australia. The official reason was technology sensitivities related to national security. Some suspect that lingering questions about possible ties between Huawei and the Chinese military may also have played a part.

But none of these politically charged "reasons" applies to Zhongkun. It is neither a state-owned company nor a business in any way related to sensitive technologies.

Huang Nubo, founder and chairman of Zhongkun, told a seminar in Shanghai last month that he does not quite understand why his initial offer failed.

"I have a special feeling towards Iceland because of a former college roommate," Huang said. "It is the only country I know well in Europe, and my investment decision was based solely on business considerations."

According to earlier reports, Huang had an Icelandic roommate while attending Peking University from 1977 to 1981 and made friends with a lot of Icelanders.

He visited the country in 2010 for the first time, and it was the Icelandic government who sought his investment in a region of the country that was economically ailing.

Huang's plan was to buy land and invest up to US$200 million to build a luxury 120-room hotel, airport, golf course and horse-riding facilities. His plan also called for Chinese rice wine to be sold in the North Atlantic island, where drinking helps wile away the long winter nights. In turn, seafood from Iceland would be exported to China, helping bridge a gap in supply created by last year's nuclear contamination in Japan.

No precedent

Huang and the government in Reykjavik reached a memorandum of understanding last August, but the pact was rejected in November. The Icelandic government cited "no precedent for selling land to foreigners" as a major reason.

The story caught the attention of the world media. The New York Times and BBC ran stories speculating on Huang's true motivations, wondering why a Chinese entrepreneur would be interested in the remote, harsh wilderness butting up against the Arctic Circle.

Icelandic political commentator Egill Helgason even compared Huang to Doctor No, the half-Chinese, half-German villain of the 1962 James Bond film. He asked whether the development plan would create a state of semi-colonialism and start a "century of humiliation" in Iceland similar to what China had suffered during the mid-19th to mid-20th centuries, when foreigners occupied Chinese territory.

Huang said he never imagined this deal would stir up such deep-seated suspicions about Chinese investment overseas. Worse, he found his explanations for his plans falling on deaf ears.

Why did Zhongkun want to buy instead of leasing the land, the foreign media asked. Huang's answer: because the Icelandic government offered to sell it in the first place.

And why was the parcel of land under negotiations so vast - the equivalent of 0.3 percent of Iceland? Huang's answer: because the land could be sold only in one block. "The useful area of the land accounts for a tiny part of the area, but if I bought only the useful block, the other would be left useless forever," Huang said.

'Demonizing China'

Shen Jiru, a researcher at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said Zhongkun's case is just the latest example of a trend "demonizing" China.

"There is a big market for 'China threat' theories," Shen said. "It produces hurdles in some really normal commercial deals. While China is marching towards a market economy, businesses in quite a few countries are more and more ruled by unnecessary political worries."

Some critics speculated that Zhongkun was intent on setting up a secret military port in Iceland that would give China influence over oil development in the Arctic. But the land Zhongkun wanted to buy was far from the coast.

Sun Lijian, an economics professor at Fudan University, said the case also mirrors indecisiveness by some foreign governments. "They need money, but sometimes they are not wise enough to accept good money," Sun said.

Robin Bew, chief economist and editorial director at Economist Intelligence Unit, suggested that Chinese investors should try to improve their overseas image and correct the impression that Chinese funds are more politically than commercially driven.

Public relations

"Chinese companies need to do more public relations to allay fears and address doubts concerning their investment purposes," Bew told a seminar last month. "You need to explain your business intentions, your long-term strategy and how you will handle the assets not only to targeted government or business officials but also to the wider community as well."

Bew's advice makes sense. It is in China's interests to portray a positive image in its foreign forays. But what happens if foreigners refuse to listen?

Setbacks haven't dented China's enthusiasm for investment overseas. Excluding financial market transactions, it expanded 1.8 percent in 2011 from a year earlier to US$60 billion. Investments in Europe and Africa surged more than 50 percent, according to the Ministry of Commerce. In the first quarter of 2012, outbound investment from China shot up 94.5 percent to US$16.5 billion.

Huang isn't feeling particularly enthusiastic anymore.

"The rejection sent a message to Chinese investors that you are welcome to emigrate or to buy properties and luxury goods, but if you want to engage in anything related with natural resources, you are not welcome," Huang said.

One can sympathize with his disillusion because the treatment accorded his company just doesn't seem justified.

Huang is undecided about whether to proceed with his resort plans given the restrictions placed on it. One thing is certain: Huang's fuzzy warm feelings toward Iceland have certainly chilled.