Chinese financial institutions are shopping the globe. After years of attracting investment from companies abroad—and trading access to Chinese markets for the foreigners’ practical expertise—China’s banks and insurers are flush with cash and looking abroad for their own investment opportunities. Beyond financial returns, they hope to use these investments to hone their skills in areas such as risk management. But our experience and analysis show that gaining solid benefits will require careful preparation and a clear understanding of what the Chinese can expect in return for what they bring to the table.

Buying a minority stake in a foreign bank or insurer is the most common route for Chinese financial institutions looking to test global waters—much more so than complete acquisitions or organic growth. But acquiring a relatively small stake in a foreign company is rarely a transformational event. And while Chinese investors can garner sought-after capabilities from these deals, much as foreign banks used investments in China to gain knowledge of the market there, they must be thoughtful and strategic in their approach.

The shift from investment target to investor came suddenly and many Chinese institutions are not fully prepared for their new role. Not long ago, state-owned Chinese...