U.S. President Donald Trump's decision to block a Chinese-backed firm from buying a U.S.-based chipmaker this week is detrimental to America's growth and the global economy, China's state news agency Xinhua said in a commentary.

Canyon Bridge Capital Partners' planned $1.3 billion acquisition of Lattice Semiconductor Corp was one of the largest attempted by a Chinese-backed firm in the U.S. microchip sector and was the first announced deal for the buyout fund, which launched last year with a focus on technology investment.

U.S. regulatory scrutiny grew after Reuters reported in November that Canyon Bridge was funded partly by capital from China's central government and had indirect links to its space program.

Trump said in an executive order on Wednesday that Lattice and Canyon Bridge "shall take all steps necessary to fully and permanently abandon the proposed transaction" within 30 days.

"The move, which is detrimental to both America's growth and global economic recovery, also runs counter to the mutually-beneficial and win-win nature of China-U.S. relations," the Xinhua commentary said.

Security reviews of investments in sensitive sectors "should not be used as a tool to implement protectionism," it added, echoing comments by a Commerce Ministry spokesman last week.

Citing analysts who said Trump's decision was made with an eye to the 2018 midterm election, Xinhua called it "penny wise and pound foolish ... It is a short-sighted move to take protectionist measures amid sluggish global growth."

"Chinese investment is not 'Trojan Horse' with hidden purposes," it said.

Trump is set to visit China in November.

"The two countries need to strengthen dialog and communication, promote cooperation and exchanges in various fields and properly handle issues of common concerns. Only then can China and the United States push forward the world's most important bilateral relationship," Xinhua said.