Chinese stocks plunged nearly 4% on Tuesday on fears of imminent interest rate hikes and a possible economic slowdown upon impact from the US recession.
These sentimens led to panic sellings at the markets, furthering eroding investors' confidence.
The Shanghai stock index, on a downhill streak in recent days, closed at 3668.90, a sharp drop of 151.15 points or 3.96% over the Monday's close.
And the Shenzhen Component Index on the Shenzhen Stock Exchange ended the daily trading at 12,489.02, a slump of 718.76 points, or 5.44 percent, from the previous trading day.
Of more than 1,500 companies listed at the Shanghai and Shenzhen stock exchanges, only less than 30 registered some increases, with the huge majority ending flat or dropping sharply. The combined transaction volume of the two market stood at 119.12 billion yuan ($16.8 billion) .
Investors fear that the central bank may resort to further interest hikes to fight inflation as consumer price index jumped 8.7 percent in February year-on-year, the highest in nearly 12 years.
Zhou Xiaochuan, who was renamed the central bank governor on Monday by Premier Wen Jiabao, said earlier during the weekend that there is still room for further rises in interest rates and bank reserve requirements.