The benchmark Shanghai composite index closed at 1,089.950 points, after rising more than 1 percent on Monday. Analysts expect more losses before the end of the week.
Top Chinese steel maker Baosteel shed 1.52 percent to end at 3.90 yuan, wiping out Monday's 1 percent gain, which had been triggered by better-than-expected quarterly earnings.
Merchants Bank Co Ltd, the biggest Shanghai-listed lender, slipped 0.32 percent to 6.26 yuan. It gained 1.5 percent on Monday after posting better-than-expected third-quarter earnings growth.
Yangtze Electric Power Co Ltd, joint operator of the Three Gorges Dam, ended the day down 1.1 percent at 7.16 yuan, after gaining 0.3 on Monday.
The benchmark index, lifted briefly by the yuan revaluation of July 21, has fallen nearly 14 percent so far this year.
Analysts expect the market to dip further as Beijing speeds up an unpopular plan to float more than $250 billion in non-traded, government-owned stock.
"It could test the 1,060 level before the end of the week," said Zhang Jiuhui, an analyst with Beijing Securities.