At the market close, the Shanghai Composite Index was down 1.2% to 3,573.21 and the blue-chip CSI300 index off 1.8%, both marking their biggest single-day drops since April 7.

The pullback broke a rally that had briefly carried the Shanghai index into bull territory.

Still, the benchmark advanced 3.7% in July, its best performance since September last year and a third straight month of gains.

A much-anticipated Politburo meeting this week offered little policy surprise, as top leaders pledged to support the economy by managing “disorderly competition” but showed no sense of urgency to roll out major stimulus.

Meanwhile, fresh data showed China’s manufacturing activity shrank for a fourth straight month in July as demand at home and abroad weakened, further dampening the growth outlook.

“Investors are taking some money off the table to book profits as markets have probably run out of positive catalysts in the near term,” said Jason Chan, senior investment strategist at Bank of East Asia.

Expectations for the upcoming US-China trade talks as the truce deadline nears are also relatively low, with most investors anticipating further truce extensions instead of fundamental improvements, he added.

Leading declines onshore, the real estate index tumbled 4.3%, the biggest decline in nearly four months, after the sector was barely mentioned in the July Politburo meeting.

Commodities-related shares also fell, with the steel, coal and materials down 3% to 4%.

Helping limit losses, the AI-related sector registered a 0.5% gain, after China flagged concerns over potential security risks in Nvidia’s H20 chips boosting domestic chipmakers.

In Hong Kong, the benchmark Hang Seng Index was down 1.6% at 24,773.33, narrowing the month’s gain to 2.9%.

The Chinese H-share index listed in Hong Kong, the Hang Seng China Enterprises Index fell 1.7%, and mainland developers listed in the city fell 4.3%.