Chinese shares dropped 1.07 percent, dragged down by an overnight Wall Street fall and a dampened investor confidence.

The Shanghai Composite Index slide 1.07 percent, or 20.26 points, to close at 1,875.56. The Shenzhen index rose 0.75 percent, or 47.26 points, to close at 6,325.31 points.

Aggregate turnover was 47.6 billion yuan ($6.96 billion), compared with the previous day's 46 billion yuan. Gains outnumbered losses by 549-242 in Shanghai and 419-227 in Shenzhen.

Wall Street suffered a sell-off on increasing concerns about global economic recession and weak corporate earnings outlooks. All major indices lost more than 4 percent while the Dow Jones average declined 514.45, or 5.69 percent, to 8,519.21.

Banking shares fell on the expectation that profits might shrink amid a world economy recession, said market dealers.

China Merchants Bank fell 4.46 percent to 13.49 yuan, while China Communications Bank dropped 4.30 percent to close at 4.90 yuan.

Analysts with GF Securities said the fall indicated the confidence of individual and institutional investors was really low.

PetroChina, the biggest component in the Shanghai index, lost 4.99 percent to 10.66 yuan. Sinopec, Asia's largest oil refiner, lost 2.88 percent to 8.09 yuan.

Property shares gained after the central bank announced late on Wednesday an array of policies to boost the falling real estate sector amid the global economic downturn.

The People's Bank of China, the central bank, announced on its website on Wednesday that the interest rate on a mortgage for first-time home buyers would be cut by 0.27 percentage points to boost domestic consumption. The floor for interest rates would be lowered to 70 percent of the central bank's benchmark rate.

China Vanke, the country's largest property developer by market value, rose 4.39 percent to 6.89 yuan. Poly Real Estate Group Co. gained 6.40 percent to 15.13 yuan.