But Jonathan Reynolds said he did not suspect the Chinese state of trying to tank the plant in northern England, the country's last factory able to make steel from scratch.
The government rushed urgent legislation through parliament on Saturday to stop the Scunthorpe plant's blast furnaces from turning off, after its Chinese owners Jingye said it was no longer financially viable to keep them burning.
Jingye bought British Steel in 2020 and says it has invested more than GBP 1.2 billion ($1.5 billion) to maintain operations but was losing around GBP 700,000 a day.
"As a country we've got it wrong in the past," business and trade secretary Reynolds told Sky News on Sunday, blaming previous Conservative leaders for allowing Chinese companies to run sensitive infrastructure. "It was far too naive about some of this," he said.
He argued a balance was needed. Some sectors were "more sensitive than others," he said, adding that "a lot of UK-Chinese trade is in non-contentious areas."
Discussing the troubles with the Scunthorpe plant, he said: "I'm not accusing the Chinese state of being directly behind this.
"I actually think they will understand why we could not accept the proposition that was put to us, in terms of losing that essential national capacity. So I'm not alleging some sort of foreign influence."
He later told the BBC that Jingye had turned down an offer of support of around GBP 500 million, instead requesting more than twice that amount with few guarantees the furnaces would stay open.
Reynolds also declined to guarantee the government, which came to power last year, could get enough raw materials to keep the two furnaces going before supplies run out.
Prime Minister Keir Starmer recalled parliament for a rare Saturday session to push through the legislation, warning that the plant was facing imminent shutdown with thousands of jobs at risk.
The government saw its possible closure as a threat to Britain's long-term economic security, given the decline of the UK's once robust steel industry.
But the Labour government came under fire from the opposition Conservative party for its handling of the negotiations and faced calls from unions and some politicians to fully nationalise the plant -- which Reynolds said was beyond the scope of Saturday's legislation but could be a "likely" next step.
The leader of the hard-right Reform UK party Nigel Farage also said he supported nationalising the plant.
On Sunday he accused the Chinese Communist Party of deliberately trying to close British Steel, without providing evidence for the claim.
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