In an age when China is rising to higher and higher economic prominence and power in the world, the United States needs to take all measures to protect itself. If Xiaoxing Xi's important physics research was being conducted thanks to the United States, then it is abhorrent that that research be used to put the U.S. in any sort of compromising position.
The chairman of the physics department at Temple University Xiaoning Xi was accused of sharing secrets with China. This is a serious and sensitive matter for the U.S. to investigate and worthy of his arrest. The loyalty of scientists to the U.S. means that they should prevent information from leaking out to other countries and that knowledge is a vital part of our resources.
The DOJ dropped all charges against him after scientists, provided affidavits that the blueprints that Xi shared with Chinese scientists were not for a pocket heater or other restricted technology. According to Xi's lawyer Peter Zeidenberg, the government failed to understand the complicated science and did not consult experts before arresting him. Xi's lawyer said that the information Xi shared as part of "typical academic collaboration" was about a different device, which he co-invented and is not restricted technology.
No, physicist Xiaoxing Xi should not have been arrested for allegedly giving proprietary physics information to his home country of China. The fact that he is a Chinese nation alone suggests that some of this information was going to go back to China. The U.S. government could have required that only U.S. citizens work on his type of physic work.