Abstract: Chinese state-owned enterprises (SOEs) face an increasing number of international investment disputes with foreign states during their foreign investment activities. International investment arbitration is the major approach used by SOEs to solve international investment disputes. However, SOEs are encountered with the dilemma of spending a substantial amount of time and money and facing a high rate of failure by resorting to the international investment arbitration mechanism. The coming into force of the United Nations Convention on International Settlement Agreements Resulting from Mediation on 12 September, 2020 brings great opportunities for the development of investment mediation. Investment mediation will become an important alternative to arbitration, providing an effective alternative for SOEs to solve international investment disputes. However, due to their property right structure, that is, being partially owned by the government, SOEs will face a lot of legal challenges in the use of this approach to solve international investment disputes. For instance, when the mutually agreed mediation agreement renders the sum of accounts received by SOEs far less than that of the accounts receivable, SOEs may be held responsible for the loss of state-owned assets and be accused of corruption. In order to effectively cope with such challenges, it is advisable to take effective measures to raise the awareness and acceptation of SOEs about investment mediation, establish a reasonable appraisal system for SOEs’ use of investment mediation, set up SOEs’ reporting system concerning investment mediation and promote the establishment of fair and effective investment mediation mechanism.