MAN Energy Solutions, a subsidiary of Volkswagen group, had been due to sell the unit to Chinese group GHGT and its offshoot Guanghan Gas Turbine.
But Germany's economy ministry said Wednesday that Chancellor Olaf Scholz's cabinet had prohibited the move, declining to provide further details owing to security concerns and the company's operational secrets.
Asked about the decision on Thursday, Beijing's foreign ministry said it "stands in opposition to politicising normal trade cooperation, overextending the notion of national security and artificially erecting trade barriers".
"We hope the German side will provide a fair, just and non-discriminatory business environment for enterprises from all countries, including China," ministry spokesperson Mao Ning said at a regular press briefing.
Germany has rules in place allowing the government to review or block foreign purchases of stakes of as little as 10 percent in "critical technology" and "critical infrastructure" companies.
According to business daily Handelsblatt, the potential buyer is believed to have close links to the Chinese armaments industry, and experts have warned it could use the gas turbine technology for military purposes including in warships, drones or fighter jets.
Fears have been growing in Germany about over-reliance on Beijing and letting critical infrastructure fall into the hands of Chinese state-linked companies.
Russia's invasion of Ukraine and the subsequent dwindling of crucial gas supplies to Europe has further accentuated the concerns.
mjw/je/smw
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