The Shanghai Composite Index fell 0.3% as of 2.19 pm local time, erasing a morning advance of as much as 1%.
The stock benchmark has gained more than 11% since a Jan 3 low.
Trading turnover on mainland exchanges hit a 10-month high at the start of the week.
“The market is in adjustment mode today after its recent rally,” said Yang Hai, an analyst at Kaiyuan Securities.
“There is a good sign for the stock market, which is rising turnover. It shows that the stock market does not lack for money right now and turnover will likely support a sustained rally.”
The China Securities Journal ran a front-page article noting a bullish trend in financial markets, while Shanghai Securities News said insurers are optimistic about the country’s equities.
That’s after a widely watched state television show aired a clip on stocks last week.
Chinese stocks, which were the world’s worst performers in 2018, have recovered more than US$882 billion in value since this year’s low.
Beijing’s increasing support for the slowing economy and the new securities regulator’s decision to ease trading restrictions have stoked an appetite for risk, with cheap valuations attracting buyers at home and abroad.
The rally has been so broad it’s sent four major indexes into overdrive.
Signs of a turnaround are emerging in China’s battered stock market, with even last year’s bears saying investors should keep buying.
While many false dawns caught traders off guard last year, rarely does a rebound in the Shanghai Composite last this long: another weekly gain this week would be its seventh in a row, the longest streak since Aug 2017.
The rally in 2019 has already pushed the gauge above the average analyst target for the end of March.
Some foreign funds have been buying ahead of MSCI’s announcement next week on whether it will feature a wider scope of A shares in its widely tracked benchmarks.
The Chinese government’s plan to form a Greater Bay Area linking Hong Kong and Macau with southern cities has given equities in the region a lift, including ports and property developers.
Guangzhou Port, Zhuhai Port and Shenzhen Yan Tian Port Holding all climbed by the 10% daily limit.
The Hang Seng Index fell 0.3%, with HSBC Holdings dropping 1.5% in the afternoon as one of the gauge’s worst performers.
The lender reported fourth-quarter earnings that fell short of estimates.
The Hang Seng China Enterprises Index was little changed.