The preliminary decision by Treasurer Josh Frydenberg is the latest in a series of rejections by Canberra over foreign purchases of Australian infrastructure and land as leaders grow increasingly concerned about Beijing's influence.
According to Mr Frydenberg, APA's position as the dominant gas pipeline owner and operator in Australia meant that handing over control to a Chinese company would place "undue concentration" of critical national infrastructure under foreign ownership.
Investors have dumped shares in Australian gas pipeliner APA, wiping more than $1 billion off its market value after the Foreign Investment Review Board rejected a $13 billion takeover of the company overnight.
He said he has made a preliminary view to block the sale, but he will make a final decision under the formal process within two weeks.
Group is the largest gas transmission system owner in Australia, owning 15,000 km (9,320 miles) of pipelines representing 56 percent of Australia's gas pipeline transmission system.
It also supplies gas for part of all mainland capital cities' consumption, gas-fired electricity generation assets and liquefied natural gas exports.
Mr Frydenberg stressed the preliminary decision was not an adverse judgment on CKI but rather reflected the importance of APA to the national economy.
"CK Group companies are already a substantial investor in Australia's gas and electricity sectors and a significant provider of infrastructure services that millions of Australians rely upon". It is about the extent to which the proposal is consistent with Australia's national interest. Its shares closed yesterday at $9.51.
The Hong Kong company a year ago bought Australian energy utility assets group Duet - which owns utility assets valued at $11.1 billion, including the Dampier to Bunbury gas pipeline in Western Australia, United Energy in Victoria and projects in the USA and UK - for $7.37 billion.
CK Infrastructure, which owns power grids in South Australia and Victoria, is the same group which exhausted to buy NSW energy infrastructure body Ausgrid but was rejected by then-treasurer Scott Morrison on national security grounds.