The logo of Aixtron SE is pictured on the roof of the German chip equipment maker's headquarters in Herzogenrath near the western German city of Aachen, October 25, 2016. [Photo/VCG]

China has become hostage to growing protectionism in overseas mergers and acquisitions, observers said, after the implosion of yet another Chinese bid due to political obstruction.

China's Fujian Grand Chip Investment Fund LP has confirmed its withdrawal from its planned deal to take over German chip equipment maker Aixtron SE, after the United States prohibited the acquisition, citing "security concerns".

Grand Chip Investment GmbH, the transaction vehicle of the Chinese bidder, said the offer has lapsed following a US presidential order last Friday to reject the inclusion of Aixtron's US unit in the proposed takeover, according to a prepared statement from Aixtron.

The German firm on the brink of bankruptcy had initially said the US blockage would not affect the rest of the deal. Both Aixtron and Grand Chip declined to elucidate why the bid finally fell apart, when approached by China Daily.

The 670 million euros ($711 million) offer announced in May had been an opportunity for profit growth and expansion of the workforce, Aixtron said on its website. But with the deal coming to a close, it has to seek local government support or otherwise face severe job cuts, its CEO Martin Goetzeler told German newspaper Handelsblatt.

China's Foreign Ministry criticized the US' "unfounded accusations" and the politicization of what was supposed to be a "purely commercial behavior".

"We hope that the US side can stop making unfounded accusations about Chinese companies and provide a level playing field and convenience for Chinese companies' investment," said Foreign Ministry spokesperson Lu Kang earlier this week.

Chinese firms are starting to encounter hostility and xenophobia when they venture abroad, said Ling Xiao, partner of Hui Ye Law Firm specializing in investment and financing.

The Aixtron deal was scrutinized by the Committee on Foreign Investment in the United States, an interagency task force that conducts national security reviews of foreign direct investment.

"Washington relies heavily on the CFIUS to run a thorough assessment of potential buyout deals. National security reasons are often stated as the reason to veto investment from China," Ling said.

An annual report of the CFIUS published this February showed a substantial uptick－52 percent year-on-year－of transactions assessed last year. Among them, China led foreign countries represented in the number of reviews for the third consecutive year.