The mainland's key stock index closed down 0.48 percent on Tuesday after investors took profits in small-cap shares after a speculative rally over the past week.
Defense-related stocks are likely to outperform the market on investors' expectation of China's growing military spending, which will be unveiled at the annual sessions of the country's top legislature this week.
China's stocks fell from a five-week high as a decline for copper producers overshadowed a rally for property stocks after JPMorgan Chase & Co and UBS AG turned positive on developers.
Hong Kong stocks fell 150.82 points, or 0.72 percent, to close at 20,906.11 on Tuesday.
The ChiNext stock market went up on Tuesday as 31 of the 58 stocks at China's start-up board for small and medium-sized enterprises gained.
China will grant licenses for margin trading and short selling to five to seven brokerages later this month, in a sign that the pilot program is moving forward smoothly, media reported on Monday.
Railroad operator Beijing-Shanghai High-Speed Railway Co Ltd is planning to raise 30 to 50 billion yuan ($4.4-$7.3 billion) through an initial public offering (IPO) this year, a source with the Ministry of Railways told China Daily on Monday.
Hong Kong stocks rose 448.23 points, or 2.17 percent, to close at 21,056.93 on Monday.
The ChiNext stock market went up on Monday as 48 of the 58 stocks at China's start-up board for small and medium-sized enterprises gained.
Chinese equities closed higher Monday led by resource-related stocks and heavyweights.
American investment guru Jim Rogers believes US stocks could be entering into a Japan-style Dark Age with falling values until 2030.
The Hang Seng China Enterprises Index on the Hong Kong Stock Exchange rose 155.23 points, or 1.36 percent, to close Friday's trading at 11,543.73.