Going overseas holds the key to development

"The Shuanghui deal is in itself evidence of the need and desire to acquire leading brands, experience and technology relating to the production process."

The report highlights that there have been three historic stages of Chinese overseas investment: the first in the 1970s and 1980s focusing on State-owned companies setting up overseas branches, representative offices and foreign trade companies; the second between 1991 and 2003 involving large SOEs setting up overseas purchasing channels and sales networks and now the third, from 2004, with increasingly strong enterprises taking advantage of favorable policies and the rise in the value of the yuan to make overseas acquisitions.

"China has entered a new phase of outbound investment where the amount, structure and quality of Chinese outward direct investment will improve," he says.

Chinese ODI at $84.2 billion in 2012, according to KPMG's own analysis in the report, is now almost a third higher than the $63.7 billion average of the G6 nations (the G7 excluding the US).

This has been a remarkable turnaround with the G6 average in 2003 of $29.2 billion being 10 times that of China's $2.9 billion at the time. China's ODI only began to rise above that of the G6 average shortly after the onset of the global financial crisis in 2009.

"What we have found out is that China's ODI caught up to the average of the G6 in a very short period of time. There was a massive gap and now its ODI is above the value," Barber said.

Some commentators insist that China's ODI has largely been driven by rising labor costs and the ever increasing value of the yuan which has driven manufacturers to set up bases in Southeast Asia and now also increasingly Africa and Latin America.

The report, which interviewed 159 representatives from Chinese companies as well as 169 from overseas, revealed that this was very far from the real picture.

Only 8.2 percent of the Chinese respondents said it was about reducing costs. Almost a fifth (19.2 percent) said it was about seeking out new markets, 16.6 percent on building international marketing networks and 15.7 percent about becoming an internationally competitive global company.

"For certain sectors, where labor costs are an important component, you would, however, expect them to transfer some of their production capacity to lower cost centers. If, however, the question is whether they should do that, the answer has to be 'not always'. I think to do it for costs alone is not sustainable," Barber said.

Barber, 42, has had an involvement with China since the age of 12 when he began studying Chinese, leading him to spend a year in China on a scholarship before studying for a commerce degree in Australia.

He came to work for KPMG in Hong Kong in 1996 and moved to Beijing in 2011 with his team because of the need for tax advice on overseas acquisitions in the mainland. The firm advised on nine of the top 20 China overseas deals last year.

Now a partner in the firm, he worked on the China oil giant CNOOC's $15.1 billion takeover of Canadian rival Nexen, the largest Chinese takeover of any foreign business.

Another co-author of the report is Iris Chen, 40, manager of KPMG Global China Practice, who joined from Boston Consulting Group three years ago.