China stocks decline after banks increase reserves

China's stocks plunged, driving the benchmark index down the most in two months, as the central bank ordered banks to set aside more reserves and rising property prices signaled policy tightening measures may be expanded.

Industrial and Commercial Bank of China Ltd. and China Construction Bank Corp. led declines for banks after the government boosted reserve requirements for the fourth time in two months to curb liquidity. Property developers China Vanke Co. and Poly Real Estate Group Co. slid more than 6 percent. Qingdao Haier Co., a home appliances maker, fell the most in two months on concern higher interest rates will damp consumer spending.

"The market is reacting negatively towards the reserve ratio increase," said Deng Eryong, a strategist at Changjiang Securities Co. in Shanghai. "The property industry will see continued scrutiny. No doubt more shoes are going to drop and no one knows when this will all end."

The Shanghai Composite Index tumbled 84.7, or 3 percent, to 2,706.66 at the 3 p.m. close, the most since Nov. 16. The CSI 300 Index slid 3.8 percent to 2,974.35, the lowest since Sept. 30. The Shanghai measure has fallen 3.6 percent in 2011. It extended last year's 14 percent plunge, the most among the world's 10 biggest stock markets, after Premier Wen Jiabao's government ordered six increases in reserve requirements and boosted interest rates twice in 2010 to curb asset bubbles after record gains in lending and property prices.