Chinese shares nosedived on Tuesday with the benchmark Shanghai Composite Index dropping 6.15 percent to close at 3,748.16 points.
The Shenzhen Component Index lost 6.56 percent to close at 12,683.86. The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, slumped 6.08 percent to end at 2,504.17.
The total turnover of the two bourses rose to 1.39 trillion yuan (217.3 billion U.S. dollars) from Monday's 1.19 trillion yuan.
Stocks in nuclear power, transportation, and the non-ferrous metal industry led the slump, with Datang International Power Generation Co., Ltd. and Henan Zhongfu Industrial Co., Ltd. tumbling by the daily limit of 10 percent.
Listed state-owned enterprises ended a rally boosted by speculation on reform, with companies such as Jihua Group and COFCO Biochemical dropping 10 percent.
The market has showed signs of recovery in the past few days with the Shanghai Index reaching more than 4,000 points before falling back to just above 3,700 Tuesday afternoon.
Investors showed optimism about the market following the government's rescue measures, including pouring in funds and restricting short selling. A total of 29 and 57 new accounts, respectively, were opened for A-share trading by qualified foreign institutional investors (QFII) and renminbi qualified foreign institutional investors (RQFII), a record high for this year, according to China Securities Depository and Clearing Company.
Despite government reassurance about continued stabilization of the market, concerns remain that authorities could pull rescue funds.
The state-owned margin lender China Securities Finance Corporation, Ltd. (CSF) said last Friday that it has transferred some shares to Central Huijin Investment Co., Ltd., an investment arm of the government, raising speculations that the CSF is pulling funds out of the market. The CSF clarified that it will hold its shares and stabilize the market during dramatic fluctuations.
On Monday, Chang Cheng Securities and China Galaxy Securities resumed short selling, which the two brokers suspended on Aug. 4 following regulations forbidding speculators to repay borrowed shares on the same trading day.
On Tuesday, the People's Bank of China (PBOC) injected 120 billion yuan (18.76 billion U.S. dollars) through seven-day reverse repurchase agreements in its latest move to provide liquidity to the market. The single-day amount hit a record high since January 2014.