China's main stock index closed below 4,000 points for the first time in seven months on Thursday, sinking 2.43 percent on concern about inflation, slower export growth and a large supply of new shares. Steel makers, among the companies most vulnerable if economic policy tightens to fight inflation, led the decline. Baoshan Iron & Steel, the biggest steel firm, slid 4.90 percent to 13.79 yuan.
The Shanghai Composite Index ended at 3,971.257 points, leaving it down 35 percent from October's record intra-day high. Falling stocks in Shanghai overwhelmed gainers by 802 to 96, while turnover in Shanghai A shares rose to 96.0 billion yuan ($13.5 billion) from Wednesday's 88.3 billion yuan.
But the index came well off Thursday's low of 3,902.248 points, because of a burst of buying during the last half-hour in a few blue chips such as telecommunications giant China Unicom, which surged 7.43 percent to 9.69 yuan.
Fund managers and analysts said they saw no strong reason for Unicom's rise, but that some funds had apparently concluded the stock had dropped to reasonable levels. Unicom bounced from just above technical support at 8.26 yuan, its November low.
This week's news that February consumer price inflation hit a fresh 11-year high of 8.7 percent fuelled fears that authorities might tighten monetary policy. Those fears seem overdone to some fund managers and to the bond market, which has remained steady since the data.
"Investors are worrying too much about the impact of monetary tightening. It won't be that awful," said Chen Ge, who helps manage 11.8 billion yuan of assets at Fullgoal Fund Management.
Merchants Bank, a favourite of fund managers, rose 2.02 percent to 30.27 yuan. But most banks were lower, with Industrial & Commercial Bank of China, the biggest, sliding 3.80 percent to 5.82 yuan. Shanghai International Airport, which plunged its 10 percent daily limit on Wednesday after saying a new fee structure would cut its income by about 10 percent, fell a further 9.29 percent to 24.30 yuan.