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Ralls Corp, which had been installing wind turbine generators made in China by Sany Group, will now be forced shelve its plans and divest its interest in the four wind farm projects it acquired earlier this year.
"There is credible evidence that leads me to believe" that Ralls Corp and Sany Group "might take action that threatens to impair the national security of the United States," Obama said in the order issued by the White House.
The projects were all within or in the vicinity of restricted air space at a naval weapons systems training facility in Oregon, the administration said.
The Committee on Foreign Investment in the United States (CFIUS) had ordered Ralls to stop all construction and operations at its four wind farm projects while the government completed its investigation and provided its recommendation to Obama.
Although CFIUS reviews dozens of foreign investment deals for potential national security concerns, the president is rarely called upon to issue a formal order as companies usually abandon their deals or divest assets when the panel takes issue with their transaction.
The last time a president formally blocked a deal on national security grounds was in 1990 when then President George H.W. Bush stopped a Chinese aero-technology company from acquiring a U.S. manufacturing firm.
Obama's decision comes as two other Chinese companies are vying for CFIUS approval and the president campaigns for a second term. Obama's trade and economic policies have come under fire from his Republican opponent, Mitt Romney, who has accused him of being soft on China.
The Treasury Department said Obama's decision was not a precedent for other investments from China or any other country.