China Shares Fall 1.5 Percent

The benchmark Shanghai Composite Index fell 1.5 percent to 5,214.23 in light trading. The Shenzhen Composite Index on China's second, smaller market slid 1 percent to 1,313.82.

"In the absence of positive news, investors were left to wonder what kind of macroeconomic tightening is in store," said Shenyin & Wanguo Securities analyst Xu Yan.

Chinese Premier Wen Jiabao's comments warning against rising asset prices weighed on the market. Wen said during a visit to Singapore earlier this week that China needs to do more to prevent speculation in the property market.

Property leader China Vanke fell 1.5 percent to 32.82 yuan while Financial Street Holding was down 2.3 percent at 31.41 yuan.

Banks also weakened on worries over a possible interest rate hike.

Industrial & Commercial Bank of China fell 2.6 percent to 7.95 yuan while Bank of China dropped 2.2 percent to 6.84 yuan.

Lingering valuation concerns over PetroChina also fueled caution among investors. The stock became a constituent of the Shanghai Index Monday, comprising 20 percent of the index, meaning that every 5 percent change in its price will move the index 100 points.

PetroChina declined 1.7 percent to 36.82 yuan.

"The stock is simply still too expensive despite recent losses," said Orient Securities analyst Zhang Yang.

In currency dealings, the dollar's fall to an all-time low against the euro Tuesday night pushed the yuan higher Wednesday.

But the yuan's gains were limited by strong demand for dollars as banks set aside funds for the most recent hike in the reserve requirement ratio.

The dollar was at 7.4129 around 0730 GMT on the over-the-counter market, down from Tuesday's close of 7.4218.