Germany's cabinet blocked the planned sale of Volkswagen's subsidiary MAN Energy Solutions' gas turbine division to a Chinese company on Wednesday, two government sources said.

The decision comes as Germany and the European Union try to reduce risks from economic ties with China.

MAN Energy Solutions said last September that the government would take a closer look at the planned sale to Chinese state-owned CSIC Longjiang GH Gas Turbine Co (GHGT).

The deal was first announced in June 2023 at an undisclosed price. GHGT belongs to the China State Shipbuilding Corporation (CSSC), which dominates the Chinese shipbuilding industry.

A spokesperson for MAN Energy Solutions declined to comment. Three people familiar with the matter had told Reuters on Tuesday that Germany would block the plans.

MAN Energy Solutions will wind down gas turbine development and production as a result of the blocked sale, one source had said, adding the group would retain its profitable turbine service business.

Germany's economy ministry has the right to review and block transactions deemed to have implications for national security.