The benchmark Shanghai Composite Index lost 4.1% to close at 2,739.7, its lowest close since Sept. 3. The Shenzhen Composite Index for China’s smaller second exchange dropped 3.7%.
Investors worry that possible new government measures to cool surging housing costs will shrink credit after regulators hiked minimum bank reserve levels last weekend in a new move to tamp down inflation pressure.
Zhang Fan, an analyst for Debon Securities in Shanghai, said, "There is only bad news in the market these days – from possible housing bubbles to Europe debt woes. Investors are pessimistic."
BusinessWeek reported that in currency markets, the renminbi weakened to 6.8264 to the US dollar, down from Wednesday’s close of 6.8263.