"But my contention is that those were steps of regulatory reform toward a more responsible and better corporate citizenship in China. It's like when you get a speeding ticket on the highway, you cannot make a case by pointing fingers at others and arguing about why they didn't get caught," said Teng.

US small and medium-sized enterprises are increasingly looking to China for export, investment and business expansion opportunities, according to the American Chamber of Commerce.

"Some hold that only the largest multinationals are able to succeed in China," said Sun. "But I beg to differ. China's rapidly expanding middle class and the untapped potential in the second-and third-tier cities, for instance, all lead to market opportunities."

The five biggest business challenges for SMEs in China are red tape, communications, human resources, business culture and relationships, Anthony Goh and Matthew Sullivan of US-Pacific Rim International Inc noted in an article.

"Cultural understanding is essential," Teng said.

In 2008, China rejected Coca-Cola Co's $2.4 billion bid for the Huiyuan Juice Group, one of the country's biggest beverage makers, for antitrust reasons. Rather than seeing the case as the death of foreign private equity investments in China, Teng said: "What we need to learn is how Huiyuan and Coke could have better dealt with overwhelming opposition to the deal.

"A good PR strategy, which Coke didn't do in its attempt to acquire Huiyuan, is a critical starting point. The sequence of steps would be very important. Coke should have developed an alliance with Huiyuan first and then turned that alliance into an acquisition. Dividing one difficult step into two relatively easy steps would be the strategy to go," said Teng.

"Knowing the real intentions of your counterpart is also critical," he said.

"It's better to target the strong, but perhaps not the largest, firms in order to avoid the heat from regulators."

Joint ventures were the preferred way when foreign investors first entered the Chinese market. The trend turned to establishing their own enterprises and growing either through M&A or organic growth after China joined the World Trade Organization in 2001.

In recent years however, many multinationals have been "slipping back into joint-ventures", especially in the areas that require licensing, according to a study by consultancy KPMG.

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