China has tightened the purse strings on foreign investment, but the government's crackdown could completely backfire, hurting the very companies it's seeking to firm up. Chinese companies had been on a massive shopping spree — outbound deals hit a new record every year since 2009, soaring 500 percent to a whopping $200 billion last year. But authorities grew worried about economic and financial risks. Cash flying offshore added more pressure to an already weakening yuan, and it was unclear how much debt firms were taking on to buy everything from luxury resorts to soccer clubs.

Xi Jinping, China's president, raises a glass to make a toast during a dinner banquet. Dale De La Rey | Bloomberg | Getty Images

It didn't take long for Beijing to strengthen capital controls, and to issue rules on what kind of acquisitions would be banned, restricted and encouraged. Regulators are reviewing the debt involved at China's most acquisitive companies, along with purchases made. The government may even force firms to offload non-performing assets in a fire sale to improve financial health – but experts say Beijing is going to have trouble doing that. "If Beijing now wants to employ a strategy of forcing companies to unwind the acquisitions ... they're going to run into some headwinds," said Chunshek Chan, global head of mergers and acquisitions and financial sponsors research at Dealogic. "If they want to sell the companies at the same valuation that they got them at in the first place, they may struggle to find buyers." Chinese firms were new to foreign acquisitions, and their playbook was to aggressively outbid everybody else. "Other buyers were not willing to pay such high valuations back then — why would they want to do it now?" Chan said.

The reasons to get the money out are still there — when there's a lot of money that needs to move, it finds a way. Yuval Tal a partner at Proskauer

Shanghai-based conglomerate Fosun famously engaged in a two-year bidding war for luxury resort Club Med, which ended with the company paying a nearly 80 percent premium over the chain's pre-battle stock price. It seemed unusually expensive considering Club Med was unprofitable, last paying a dividend in 2001. At the time, Moody's rated the deal credit negative, saying it didn't expect the investment to materially increase Club Med's cash flow or earnings before interest, tax, depreciation, and amortization (EBITDA) – a measure of a company's operating performance – in the short term. It looked like Fosun had bought a lemon. Acquiring at significantly high prices reached a peak in 2015, the year the Fosun deal closed. The median value of China's overseas acquisitions hit 16 times EBITDA, versus the global median of 13 times, according to Dealogic data. That means Chinese companies were acquiring firms at much higher valuations than global peers. Now, "there's a good chance they'll have to sell at a lower price than they bought," said Yuval Tal, a partner at law firm Proskauer who specializes in cross-border mergers and acquisitions. But "selling at a discount [means] you're locking in a permanent loss of capital, which is not what the intention ... was in the first place," Chan said. "So forcing these companies to unwind could have the opposite effect." In other words, if Beijing were to order a sale of company assets, it could end up hurting, rather than helping, the bottom line.