President Trump.

It was "unwise" for US President Donald Trump to stop a Chinese firm from acquiring an American semiconductor company this week, according to official news agency Xinhua.

The state news outlet said in a commentary on Saturday that "Chinese investment is not a Trojan horse" and that Trump's decision to block a deal was "penny wise and pound foolish".

It did not directly name the deal. Trump issued an order on Wednesday to stop a US$1.3 billion takeover of Portland-based Lattice Semiconductor (LSCC - Get Report) by Canyon Bridge Capital Partners - a private equity firm backed by China Venture Capital Fund - on the grounds that it was a national security risk.

"Security reviews of investments in sensitive sectors are the legitimate rights of all countries, but that power should not be used as a tool to implement protectionism," Xinhua said. 

The US government has been sensitive to Chinese acquisitions in recent years, particularly sectors in the hi-tech industry such as telecoms and chip makers that it deems critical to national security. Trump, who has been vocal about what he considers China's unfair trade practices, has also initiated an investigation into forced technology transfers from US companies when they invest in China.

Lattice and Canyon Bridge appealed to Trump after failing three times to get approval for the takeover from the Committee on Foreign Investment in the United States, or CFIUS, which scrutinises such deals.

The commentary went on to criticize Trump's decision as a bid to win more votes in next year's midterm elections. "As a matter of fact, however, such a move is penny wise and pound foolish," it said.

It is unusual for a US president to directly shut down a business deal over national security concerns - Trump's was just the fourth such order in the past 25 years.

"Chinese investment is not a 'Trojan horse' with hidden purposes," Xinhua said. "As for this issue, it is in the interests of the United States itself to focus on the bigger picture and have a long-term vision, instead of being preoccupied by immediate interests." 

The commentary also suggested that Trump's hostility towards Chinese investment could overshadow his planned China trip.

"With President Trump set to pay a visit to China later this year, the two countries need to strengthen dialogue and communication, promote cooperation and exchanges in various fields and properly handle issues of common concern. Only then can China and the United States push forward the world's most important bilateral relationship," it said.

Read the original article on South China Morning Post. For the latest news from the South China Morning Post download our mobile app. Copyright 2017.

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