This paper investigates China's present approach of using "outward-oriented" higher education internationalization for status and image enhancement, and the challenges it faces in the response to this approach. It examines the three major dimensions of China's present approach including its cultural diplomacy based on Sino-foreign higher education collaboration (i.e., the Confucius Institute program), international development aid in higher education, and international student recruitment at the higher education level. The theoretical framework is developed based on neo-Marxist theories of center-periphery model and world system. The concepts of "soft power" and public diplomacy, Knight's argument of "knowledge diplomacy," and Hayhoe's argument about HE-based civilizational dialogue have been used. The paper reviews and analyzes China's strategic plans related to its higher education internationalization, as well as relevant academic and non-academic literature about the three major dimensions of its present approach. Findings reveal that tensions still exist between China's goals and the reality. It suggests that China's approach should be given a neutral and serious assessment.