A raging euro zone sovereign debt crisis needs hundreds of billions of euros worth of asset and bond sales to solve it, European banks will probably offload 3-5 trillion euros ($3.9-$6.5 trillion) of assets to meet tight new capital rules, and the United States has a $1 trillion fiscal deficit to close.

But the reluctance of foreign governments to accept the acquisition of stakes in strategic assets by entities ultimately controlled by the Communist Party of China and a patchy track record in dealmaking is likely to lead to frustration all round.

"There are clear and powerful obstacles to investments of the scale necessary to reach and hold over $100 billion in outward investment in the short term," said Derek Scissors, a research fellow with the Washington-based Heritage Foundation, who tracks China's global investment hits and misses.

"One obstacle is still the maturing capacity of Chinese firms to conclude sophisticated transactions," Scissors said. "A bigger obstacle is unease with a rush of Chinese money which co-exists with the desire for Chinese financing."

That seems particularly true in the European Union, where the need for funds is the most urgent, the political barriers among the most complicated, and China's shopping list selective.

A two-day EU-China Summit in Beijing this week seemed to deliver nothing substantive to boost investment beyond a bland pledge from European Commission President Jose Manuel Barroso to develop a bilateral investment agreement.

However, Australia may have shown a way forward in navigating deals with Chinese buyers after outlining its preferences for foreign investment in big companies in 2009, pointing to the types of deals which would succeed and which wouldn't.

Australia Resources Minister Martin Ferguson said last year that Chinese dealmakers now understood how to navigate mergers and acquisitions in Australia after years of frustration.

Transactions have indeed soared since and the Heritage Foundation says Australia is the single biggest recipient of inward investment from China.

Europe could certainly use all the help it can get. China's foreign direct investment into the EU was just $4.3 billion in 2011, according to Ministry of Commerce data. And that was a 94 percent increase over 2010.

UNION RESISTANCE, POLITICAL OPPOSITION

When it comes to barriers, take Italy, which some analysts say could be forced to sell as much as 400 billion euros of the 1.8 trillion euros of state assets it owns to tackle a crushing public debt burden.

European government debt expert Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, says Italy's most valuable assets are those that it would be most politically difficult to sell -- such as oil and gas companies, the railways and the postal service.

"Union resistance to sell-offs is likely to intensify," Spiro said. "Political opposition is also a factor," he added, pointing to 2008's blocked sale of Alitalia to Air France-KLM -- an internal euro zone deal -- as one sign of the size of the struggle ahead to make asset sales work.

China is picky about what it wants, as any investor would be when parting with billions of dollars and dealing with owners reluctant to sell top quality goods to close a funding gap they hope will close itself given enough time.

"We may be poor, but we aren't stupid," China central bank adviser, Xia Bin, told reporters on the sideline of an economics forum on Monday, ahead of the start of the EU-China summit.

"We must follow commercial principles in making such investments. That means we want returns." [ID:nL4E8DDHAD]

China also wants technology, resources and strategic assets, which worries Western politicians and their electorates.

"The U.S. has seen the most transactions of more than $100 million since 2005, but trails Australia in total investment and Brazil in growth because Chinese firms perceive, correctly, that very large investments in the U.S. will meet political opposition," said Scissors.

Deals ran into trouble everywhere from Iceland to Myanmar in 2011, including a $5.4 billion PetroChina (>> PetroChina Company Limited) deal in Canada, a $7 billion CNOOC (>> CNOOC Ltd.) transaction in Argentina and Bright Food Group's $2.5 billion bid to buy French yoghurt maker Yoplait.

China's failed foreign forays totalled $32.8 billion in 2011, Heritage Foundation data shows.

That's more than half the value of all the overseas deals Chinese entities did manage to sign last year, which the Ministry of Commerce puts at $60.1 billion.

BALANCING CAPITAL FLOWS

Balancing the capital flows is a tough job, given that Ministry of Commerce figures show China attracted almost twice as much foreign investment as it made in 2011.

The Ministry's calculations show inbound foreign direct investment (FDI) rose 9.7 percent last year. Outbound non-financial FDI grew just 1.8 percent. Officials want that to average 17 percent in the five years to the end of 2015, amassing $560 billion of investments in the process.

Most of that $560 billion could reasonably be expected to find its way into real assets in the economies where China has a steady income from trade which could be used to fund purchases.

That would achieve twin goals of balancing capital flows and reducing exposure to the paper assets from the U.S. and Europe which analysts believe China's top policymakers have tired of.

Beijing has watched for two years as Europe's crisis has choked growth and demand in China's biggest export market and stoked default risks on the near $800 billion of euro zone government bonds it is estimated to own as part of its $3.2 trillion of foreign exchange reserves.

Chinese leaders on Wednesday offered words of support and faith in Europe's ability to solve its crisis -- as they did in the autumn when Klaus Regling, the head of the 440 billion euro European Financial Stability Facility, came to town to persuade China to buy more of the bonds he needs to sell.

But record low yields on U.S. Treasuries and a depreciating dollar has seen the value of China's dollar holdings fall by a third in the last 10 years, adding weight to Beijing's view that the time is ripe to change investment tack.

If China can engineer a rise in cross-border corporate merger and acquisition activity, it could take some of the political sting out of the rebalancing flows. But not all.

Suspicion and union problems were sparked when Sany Heavy Industry (>> Sany Heavy Industry Co., LTD), China's largest maker of construction machinery, bought German firm Putzmeister for 360 million euros, chief executive Xiang Wenbo told a business forum on the sidelines of the China-EU Summit.

The deal was one of the biggest Chinese acquisitions in Europe, despite being tiny both in terms of global M&A transactions and the amount of money Europe needs to attract.

But things are worse in the U.S., Xiang said.

"The problem is not that we do not want to buy things in the United States, but the lack of good mutual political trust. The Americans always worry that if advanced technology is sold to China, China will manufacture advanced aircraft, tanks, artillery and then go fight the Americans, which is a barrier."

(Additional reporting by Lucy Hornby; Editing by Neil Fullick)

By Nick Edwards