Chinese investment abroad is drawing scrutiny as global leaders increasingly look to China to prop up the world economy, even though some remain wary of the country’s dominance.

The head of one of China’s biggest private equity firms said at the World Economic Forum on Thursday that foreign prejudice about Chinese investment is unfair and that Chinese investors are still learning a game that much of the world has been playing for decades.

With China’s “state capitalism” booming and Western economies lagging, business and political leaders also discussed the prospects for democracy worldwide, at an Associated Press debate.

Attention at the invitation-only gathering in the Swiss Alps turned Thursday to China, and how and whether it could help developed economies in Europe and the United States avoid new recession.

Chinese companies and government funds have been using vast reserves of cash to buy up foreign companies and invest in foreign government bonds in recent years. But with billions of dollars in Chinese investments pouring into their countries, some governments have accused China of seeking to exploit the economic weakness of others to grab valuable natural and technological resources at rock bottom prices.

President Barack Obama’s administration also has repeatedly accused China of breaking global trade rules by giving unfair protection to its companies and domestic workers.

“The vast majority of Chinese companies are trying to follow the rules as they understand it,” said John Zhao, CEO of Hony Capital. “But many Chinese companies are still trying to learn the rules.” His company controls PC maker Lenovo, which bought IBM’s computer division in 2005.

The director general of the World Trade Organization, Pascal Lamy, said China will continue to face “public perception problems” from its investments abroad.

“We will see in the years to come, as China’s investments grow and grow. … We will have the same sort of political turbulences as we have had on trade for the last 10 years,” he said.

One way for China to ease the rest of the world’s fears about its extravagant corporate shopping sprees is be more open about its vast poverty problem at home, said Lamy.

“In order for this to result in a win-win game, a number of public perception issues have to be addressed,” he said.

Nasdaq CEO Robert Greifeld reminded listeners that China’s companies aren’t the only ones with a reputation problem.

“We in the Western world have had a long tradition of corporate misdeeds,” he said, citing Enron in the United States and Parmalat of Italy – both of which collapsed after years of hiding massive holes in their accounts.

Yale President Richard C. Levin suggested the rest of the world could be grateful for China’s investment interest, as eventually the country of more than 1 billion people will have to start spending more of its cash on problems at home, including the lack of proper social security for an aging population.

“Some fraction of these trillions could be used domestically,” he said.

The head of the Asian Development Bank said Asia already has been affected by the ongoing European financial crisis in two ways – through the withdrawal of credit in Asia by many European banks and financial institutions, and a drop in trade, which will impact China because Europe is its largest export market.

“I really hope that the European financial crisis can be overcome,” Haruhiko Kuroda told the AP.

British Prime Minister David Cameron, whose country doesn’t use the troubled euro, urged the eurozone to impose fiscal discipline and integrate its budget policies more, and expressed support for jointly issued eurobonds.

Cameron defended “genuine market capitalism” against those who favor “state capitalism” such as that practiced in China or Russia. He said free-market countries with rule of law where governments can be successfully challenged in court “have got to stand up and shout about their values. … I don’t think we should give up in this battle at all.”

Cameron also joined Germany’s Chancellor Angela Merkel in backing the idea of a free-trade deal between the European Union and the U.S., claiming that a trans-Atlantic pact could deliver a much-needed boost to global commerce.

The annual Davos forum is under growing criticism by those who feel it’s too removed from the real world. Activists from Occupy Davos are camping out in igloos and yurts to call attention to income inequality.

“This is a man-made crisis and the people who have caused the crisis, many of whom are in Davos, should be held to account,” said Salil Shetty, the secretary general of Amnesty International, told AP.

At the democracy debate, a range of leaders agreed that Western-style democracy is still a valid model for the world, as long as it draws in all segments of society and takes social equality as a central tenet.

U.S. Rep. David Dreier, a Republican from California, said activism such as the Occupy movements needs to be a part of the democratic process.

“We can’t say to people be patient. We need to figure out how to address this,” he said.

Associated Press