The CSI300 index fell 0.1 per cent to 5,492.74 at the end of the morning session, while the Shanghai Composite Index lost 0.2 per cent to 3,561.77.
The US lifting of restrictions on interactions with Taiwanese officials is a “big thing”, Taiwan Foreign Minister Joseph Wu said, describing it as a major boost for relations with the island’s most important global backer.
Adding to the pressure, mainland China saw its biggest daily increase in Covid-19 cases in more than five months, the country’s national health authority said, as new infections in Hebei province surrounding Beijing continued to rise.
Leading declines, the CSI new energy index dropped 3.1 per cent. The index had gained more than 100 per cent in 2020, thanks in part to China’s carbon neutrality pledge.
Bucking the broad weakness, banking firms rose after data pointing to a continued recovery in the world’s second largest economy.
China’s factory gate prices fell last month at their slowest pace since February, official data showed on Monday, suggesting China’s manufacturing sector continues to see a steady recovery from the Covid-19 shock.
Many analysts remained bullish on the market, citing a contiued economic recovery and ample liquidity.
“A weak dollar and decreased overseas risk would help continued foreign inflows into the A-share market,” Pacific Securities noted in a report.
Liquidity conditions in China would remain relatively loose at the start of the year, while there is still room for mutual funds to boost equities holdings, the brokerage added.