Shanghai stocks opened down 4.39 percent Wednesday on deepening gloom over the Chinese economy which slammed global markets overnight, dealers said.
China's benchmark Shanghai Composite Index slumped 138.94 points to 3,027.68 at the open. It later cut some of the losses, with the index down 3.23 percent by mid-morning.
The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 4.66 percent, or 79.60 points, to 1,628.18 at the open.
"Poor economic data and weak investor confidence are together pushing down the market now," Zheshang Securities analyst Zhang Yanbing told AFP. "The market is on a downward trend and it can't be stopped now."
The Chinese government said Tuesday that its Purchasing Managers' Index (PMI) of manufacturing activity came in at 49.7 last month, its lowest for three years.
Global stock markets plunged on Tuesday on the evidence of the slowdown in China's economy -- the world's second largest -- which triggered sell-offs on US and European exchanges.
"The (China) market fell as global markets slumped last night," Zhang Gang, an analyst at Central China Securities, told AFP.
Trading on China's stock markets has been extremely volatile for the past two months, after a 150 percent rally over the previous year collapsed from its peak in mid-June.
The government has launched a rescue package to prop up the market, which includes funding state-backed China Securities Finance Corp. (CSF) to buy shares, but investors worry the government will reduce its intervention.
"The government seems to have been buying blue-chips these days to support the market but investors have lost confidence amid the ongoing deleveraging and the overnight global rout," Wu Kan, a Shanghai-based fund manager at JK Life Insurance, told Bloomberg News. "The correction isn't over yet."
The state-owned China Securities Journal reported on Wednesday that securities firms are transferring more funds to the CSF to help stabilise the market, with the additional amount estimated at more than 30 billion yuan ($4.7 billion).
Analysts estimate the Chinese government has spent hundreds of billions of dollars to prop up stock prices.
Chinese financial markets will be closed on Thursday and Friday for a holiday to commemorate the 70th anniversary of victory over Japan and the end of World War II, with trading to resume on Monday.