Chinese shares plummeted the most since Aug. 31 last year on Friday, as investors feared more interest rate rises after inflation hit a 25 month high in October.
The benchmark Shanghai Composite Index lost 5.16 percent, or 162.31 points, to 2,985.44.
The Shenzhen Component Index dropped 7 percent, or 958.40 points, to close at 12,726.54.
Combined turnover rose to 533.21 billion yuan (78.41 billion U.S. dollars) from 506.18 billion yuan the previous trading day.
More than 150 stocks dived by the daily 10 percent limit.
The government has shown its resolve to curb inflation expectations and asset bubbles and thus interest rates could be hiked again by the end of this year, the China International Capital Corporation Limited said in a report on Friday.
Tightening worries triggered panic-selling, dealers said.
Friday's plunge was also prompted by rumors of a rise in the stamp duty tax on stock trading. Online portal Sina.com reported the Ministry of Finance said the speculation was unfounded.
Financial stocks dived as government tightening measures could hurt their profit margins.
Citic Securities, the country's largest securities broker, was down 9.27 percent to 14.19 yuan. Merchants Securities ended at 22.00 yuan, down 9.02 percent.
Industrial and Commercial Bank of China Ltd., the nation's largest lender, slid 1.89 percent to 4.68 yuan. Bank of China lost 3.43 percent to 3.38 yuan.
China's consumer inflation hit 4.4 percent in October, the highest in 25 months. New bank lending also exceeded market forecast.
Analysts said the quantitative easing policies by the U.S. Federal Reserve will exacerbate the excess liquidity problem, resulting in further hot money inflows into emerging economies like China, and might complicate China's fight against inflation.
Iron and steel makers tumbled on concerns that slowing growth would reduce demand for their products.
On Friday, commodity futures for sugar, cotton, soybean and rubber tumbled by their daily limits. Analysts said the fall was due to profit-taking after recent gains.
Baotou Iron & Steel, was down 10.06 percent to 4.47 yuan. Ansteel lost 7.89 percent to 8.76 yuan.
Rare earth producers slid despite reports that China's Ministry of Commerce said 2011 rare earth export quotas will not significant drop.
Baotou Steel Rare Earth Group, a major rare earth maker based in northern China's Inner Mongolia, lost 7.91 percent to 77.50 yuan. China Nonferrous Metal Corp ended at 33.80 yuan, down 8.53 percent.
To stem the imminent inflation risks, China's central bank raised the lending and deposit rates by 25 basic points on Oct. 20, the first such move in three years.
It also hiked the deposit reserve requirement ratio for Chinese financial institutions by 50 basis points from Nov. 16, which was estimated to freeze more than 300 billion yuan.
