China's securities regulator has blocked Goldman Sachs Group Inc's plan to buy a stake in Guangdong Midea Electric Appliances Co, the Chinese manufacturer said yesterday.

Analysts said the rejection probably was because Midea's share price had increased substantially since the global investment banking giant's original purchase offer.

Midea's shares lost ground after the announcement. An official in Midea's securities department declined to comment on the regulatory rejection.

The proposed deal, announced in November, was approved earlier by the Ministry of Commerce.

"The deal probably didn't pass because of the low transaction cost compared with the current stock price," said Xu Yinhui, an analyst at Guotai Jun'an Securities Co.

During the lengthy approval process by the China Securities Regulatory Commission, the Guangdong company's share price increased almost sixfold.

Midea, a major domestic home appliance maker, announced in November it would place 75.6 million shares with GS Capital Partners Aurum Holdings - a wholly owned subsidiary of the US investor - for 9.48 yuan (US$1.26) a piece. The shares, which were trading publicly for 6.12 yuan at the time, represented a 10.7 percent stake in the Chinese manufacturer.

Midea said it would use the 716.64 million yuan generated by the deal to pay off debt and fuel cash flow.

In June, the Guangdong maker doubled its outstanding shares, adjusting the stake purchase to 151 million shares with a price of 4.74 yuan per share.

Xu said the two companies can resubmit the deal for approval after revising its terms. But the new share price should be no less than the average price during the 20 days before the company board reapproves the deal, according to regulations.

Midea's share price dropped 3.6 percent to 34.5 yuan on the Shenzhen Stock Exchange yesterday. It has jumped 500 percent so far this year, compared with a 161.5 percent increase in the Shenzhen Composite Index.

Analysts said the failure to complete the transaction would lead to a short-term correction in Midea's share prices, which, in the long run, will remain bullish as a result of the company's robust earnings growth.

First-half net income expanded 113.88 percent to 710.48 million yuan, Midea said in a statement posted on the Shenzhen bourse yesterday. Revenue reached 19.05 billion yuan in the first six months, compared with the 12.49 billion yuan a year earlier.