Profit-taking after a three-month rally depressed China's shares on Wednesday, while property developer AJ Corp under-performed on news that an ex-board member had been arrested for graft.
The benchmark Shanghai composite index, grouping hard-currency B shares and yuan-denominated A shares, closed down 2.08 percent at 1,647.381 points.
But the index is still up 25 percent since November, buoyed by repeated government pledges to revamp capital markets.
"Profit-taking pressure is still high after that sharp rally, while the AJ scandal hit investor confidence further," said analyst Wu Kan of Shanghai Securities Consulting Co Ltd AJ Corp was one of the day's most active counters, sliding 2.8 percent to 8.05 yuan.
The stock has plunged 25 percent over the past week on talk of internal problems, brokers said.
Chinese police have arrested Liu Shunxin, a former board member of AJ, for economic crimes, the official China Securities Journal said on Wednesday, the latest corporate chief targeted in a crackdown on corruption.
Liu resigned from AJ Corp on Sunday, the same day he was arrested on suspicion of using a loan of 300 million yuan to 500 million yuan ($36 million to $60 million) to speculate in Hong Kong stock, it said.
Most blue chips were battered by profit-taking on Wednesday. The most actively traded, China United Telecommunications Corp, fell 3.7 percent to 4.71 yuan after a 40 percent rally over the past three months.
But BOE Technology Group Co Ltd outperformed after saying it planned to float its display unit on overseas markets as part of a global expansion strategy.
Its shares, open to select foreign investors, rose 1.62 percent to 16.29 yuan.