Chinese share prices were sharply lower in Tuesday morning trade, losing 4.07 per cent, amid growing fears of a US recession after sharp selloffs overnight in overseas markets, dealers said.
They said Chinese markets will likely fall further with investors needing time to rebuild their confidence after the key Shanghai index fell more than five per cent on Monday.
US markets were closed for a holiday on Monday while stocks fell sharply overnight in Europe and in Asia-Pacific markets like Japan and Australia.
The slump in Hong Kong and other markets also added pressure on domestic shares amid resurgent worries about the impact of a mortgage default crisis and subsequent credit crunch in the US.
"Investors are worried about a recession in the US economy as the slow down will affect the Hong Kong market a lot," said Mo Fan, an analyst with Soochow Fund.
Sharp declines in Hong Kong tend to increasingly affect the Shanghai bourse because many Chinese mainland firms have listings on both markets.
"A-shares performance in the coming days will mainly depend on overseas markets. The floor for the Shanghai index is around 4,000 points," said Zhang Gang, an analyst at Southwest Securities.
The benchmark Shanghai Composite Index, which covers both A and B shares, ended the morning down 200.13 points or 4.07 per cent at 4,714.30.
The Shanghai A-share Index fell 209.63 points or 4.06 per cent to 4,947.81 and the Shenzhen A-share Index lost 62.27 points or 4.09 percent at 1,461.91.