China's shares fell 0.8 percent on Tuesday as investors cashed out of large caps such as Huadian Power International Corp Ltd, which had led a market rally over the past four weeks. The benchmark Shanghai composite index closed at 1,177.278 points.
But the index is still up 15.4 percent since July 21 when Beijing revalued the yuan by 2.1 percent and de-pegged it from the US dollar in a move seen as boosting corporate buying power and domestic consumption in the long run.
Huadian Power, China's third largest electricity producer, finished down 4.1 percent to 3.25 yuan, although it is still up 13.6 percent since July 21.
Analysts said investors were keen to take profits after the recent rally, but they expected the market to resume its uptrend in September.
"A consolidation is likely to last until the end of next week, during which investors are expected to focus on stocks announcing market-moving news," said Daton Securities analyst Zhang Yaliang.
The month-long rally has helped lift the market off eight-year lows but the benchmark index is still down 7 percent so far this year, partly depressed by an unpopular programme to sell more than $200 billion of untraded state holdings in listed firms.