The Shenzhen Tech Components Index also fell 1.3% to its lowest level in more than two months.
The loss of Chinese stocks comes as the country battles an intense wave of Covid outbreaks. Local cases of Covid-19 infection have been identified in all provinces in mainland China over the past 10 days, according to CNN’s calculations based on data from the National Health Commission.
The rapid spread of cases has raised concerns about new lockdowns. Earlier this year, China imposed severe restrictions for several months in Shanghai and other key cities, disrupting consumer activity and disrupting global supply chains.
“Introduction of virus restrictions in several parts [China’s] Major cities continue to highlight their fight against spread containment,” said Yip Jun Rong, market strategist at IG Group, adding that Beijing’s tough zero-Covid stance means the country’s growth outlook can remain subdued.
Investors were also upset by the news that China’s massive manufacturing industry continued to contract in August amid the worst heat wave in the country in six decades.
A government survey released on Monday showed that the manufacturing purchasing managers index rose to 49.4 in August from 49 in July, but remained in contraction territory. A mark of 50 separates contraction from growth.
“Economic activity remained weak in August, partly due to power shortages caused by heat waves,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note Wednesday.
The energy crisis eased this week as power was restored to industrial consumers in Sichuan and Chongqing. But the main constraint on the economy — the zero-Covid policy — has not been lifted, analysts warn.
“Disruptions due to power shortages are now receding,” but the Covid situation is “getting worse again,” Julian Evans-Pritchard, senior China economist at Capital Economics, wrote in a report Wednesday.
“At this point, the disruptions it causes seem modest, but the threat of disruptive lockdowns is growing,” he said.
– CNN Beijing Bureau and Simone McCarthy contributed to this report.