Chinese shares have dropped to their lowest levels in four years, as worries spread that a cash squeeze could threaten the country's economic growth.
Traders said on Tuesday that shares sank deeper into bear market territory pulling down most other Asian stock markets and commodity prices.
"The impact of tight liquidity has been critical and it's very rare to see the market falling more than five percent two days in a row," Sinolink Securities analyst Tao Jinggang told AFP.
China's central bank said later in the day that it would guide market rates to reasonable levels, and it expected
seasonal factors that caused a recent spike in interbank market rates would gradually fade.
The benchmark Shanghai Composite Index ended down 3.73 points at 1,959.51 on turnover of 104.7 bn yuan ($17.0 bn).
The close was the lowest in over four years.
The index tumbled as much as 5.79 percent in afternoon trading - following a 5.30 percent dive on Monday - before rebounding on bargain-hunting amid rumours state-backed funds had entered the market, analysts said.
Cash dries up
Investors are increasingly concerned as cash dries up and the interbank rates - the interest banks charge to lend to each other - jumped, raising fears they will cut back on loans, which would in turn drag on the economy.
The central People's Bank of China added to those worries on Monday when it ruled out providing any fresh money to bolster markets and ordered banks to get their own houses in order.
The China Beige Book survey said on Tuesday that the mainland economy was slipping across the board. It also revealed that a drop in private sector corporate borrowing, which contradicted official data that suggested a surge in credit growth across the economy.
"Pricing power deteriorated more than inflation in input costs and wages, resulting in a profit squeeze. Charged interest rates rose and company borrowing fell yet again," Leland Miller, the president of CCB International, which published the survey, said in a statement.
"Our data are clear that there has been no flood of credit."
Meanwhile, the People's Daily newspaper, on Tuesday warned the government would not play "wet nurse" to investors by boosting the market.
"The securities regulatory commission is not the stock market's 'wet nurse' nor is the central bank," the newspaper said in a commentary.
"So-called market-saving and market-boosting acts will not help the stock market, rather they will harm the market," it said, adding such moves would hurt efforts to improve the nation's capital markets.