Chinese companies must "remain calm and clear-headed" over foreign mergers and acquisitions as the risks of such deals are on the rise, said a Chinese business leader.

"Some overseas assets are at low prices now but that is not the purpose of acquiring businesses," said Fu Chengyu, chairman and CEO of major oil firm CNOOC Ltd.

He added a company must consider whether it can afford the costs and whether it can increase the value of the company.

Political and economic risks, such as protectionism, are higher than before the crisis and companies should be extremely prudent about overseas acquisitions, said Fu, the boss of China's largest offshore oil producer, during the Boao Forum for Asia annual conference in Hainan province over the weekend.

CNOOC is now taking a patient approach to overseas deals rather than rushing for overseas oil and gas assets, Fu said.

CNOOC is known for its bold moves. It hit the headlines in 2005 when it bid $18.5 billion for California-based Unocal Corp. The deal was later blocked by the US Congress. Since prices of many international assets plunged late last year, a number of Chinese companies, including resource companies, have considered pursuing overseas assets.

The best known is Aluminum Corp of China's planned $19.5-billion investment in Rio Tinto that marks the biggest overseas investment in history by a Chinese company. The deal is subject to government approval.

"When you are coping with the financial crisis, you must also keep in mind that competition will further intensify if the economy recovers," he said. Besides, he added, CNOOC will further increase investment in research and development, improve management and reallocate internal resources in a bid to improve efficiency.

CNOOC set a goal of growing 7 percent to 11 percent in 2005 through 2010 in terms of output, with a goal of producing 225 to 231 million barrels of oil equivalent for 2009.

Because CNOOC's all-in cost for every barrel of oil produced was $19.78 in 2008, it makes the company competitive compared with industry peers, even as the price of oil stands at around $40 per barrel now.