Chinese stock prices ended the earlier session 3.16 percent lower on Tuesday following overnight heavy losses on Wall Street and despite the latest moves of the country's central bank to boost the economy.
The benchmark Shanghai Composite Index breached the 2,000-pointlevel several times, but managed to stay above the barrier at the end of the morning session. The market was closed on Monday during the Mid-Autumn holiday.
Investor confidence was badly hit across the globe because of the latest collapse of U.S. investment banks.
The Dow Jones Industrial Average plunged 504.48 points, or 4.42 percent, to 10,917.51 on Monday. The steepest drop since the Sept.11 attacks in 2001 came after Lehman Brothers filed for bankruptcy and Merrill Lynch agreed to be taken over by Bank of America.
Later on Monday, the People's Bank of China announced it would lower the lending interest rate across the board and the reserve requirement ratio for small and medium-sized commercial banks.
Banking shares led the decline in the morning, as the country's major lenders are exempt from the reserve requirement ratio adjustment.
The share price of the Industrial and Commercial Bank of China, the country's biggest lender, plunged 9.24 percent to 3.83 yuan (0.56 U.S. dollars), as profit margins of large commercial banks were squeezed by the lower lending rate.
The Bank of China tumbled 7.74 percent to 3.22 yuan, and the China Construction Bank dropped 9.51 percent to 4.28 yuan.
Small and medium-sized banks were also hit by the lower lending rate despite the relaxed reserve requirement ratio. The Bank of Beijing declined 6.93 percent to 7.25 yuan and the China Merchants Bank almost fell by the daily limit of 10 percent to 16.07 yuan.
However, investor confidence in the property was still bolstered by the central bank moves, as analysts believed they indicated the government's intention to maintain economic growth by solving the funding pressure on enterprises.
The Asian Development Bank report said the move showed the central bank was about to relax the tight policy, which was implemented to fight soaring inflation.
The property sector rebounded on the back of possible loosening of finance policy and the lower lending rate. Lvjing Real Estate soared 9.97 percent to 6.73 yuan, and Poly Real Estate Group rose 6.57 percent to 12 yuan, among other property firms that gained in the morning.
Heavy-weight Sinopec also rose 2.56 percent to 9.2 yuan after the global crude price fell below 95 U.S. dollars per barrel during trading, and the country's airlines also gained 2 to 3 percent on lower crude prices.