Chinese equities closed down Wednesday as the benchmark Shanghai Composite Index fell 0.85 percent, or 27.96 points, to close at 3,254.22 points.

The Shenzhen Component Index lost 0.09 percent, or 12.19 points, to close at 13,505.18 points.

Losers outnumbered gainers by 481 to 327 in Shanghai, and 453 to 306 in Shenzhen.

Combined turnover shrunk to 260.93 billion yuan (38.2 billion U.S. dollars), from 265.55 billion yuan the previous trading day.

Shares opened lower in the morning, with the Shanghai market opening 0.14 percent lower, and the Shenzhen market 0.06 percent lower.

The index then gained power on robust steel and coal shares, as prices of these products were expected to rise with growing demand.

The morning rally began to fade in the afternoon, led by sliding banking, insurance and real estate shares.

Rumors that Bank of China would issue new shares to meet minimum capital requirements after heavy 2009 lending, depressed banking shares.

The CITIC Bank dropped 2.82 percent to 7.94 yuan. Huaxia Bank shed 3.65 percent to close at 12.13 yuan. The Industrial Bank lost 0.37 percent to 17.36 yuan.

Real estate shares also lost ground as investors worried the government may try to cool rising house prices by imposing a property tax.

Zhongjiang Real Estate Co. Ltd. lost 0.36 percent to 9.92 yuan. Celebrities Real Estate Development Group Co., Ltd. shed 0.11 percent to 7.84 yuan.

Insurers also saw prices drop after China Life, the nation's biggest life insurer, announced late Tuesday that it would make 19.2 billion non-tradable shares unlocked on Jan. 11.

China Life shed 3.09 percent to 30.45 yuan. China Ping An Insurance lost 2.13 percent to 53.41 yuan.

Coal and steel shares rose during Wednesday trading.

China Shenhua Energy Co., the country's largest coal producer, saw it stock rise 0.14 percent from the previous trading day to close at 35.18 yuan. Datong Coal Mine gained 1.44 percent to close at 47.21 yuan.

Baosteel, China's leading steel maker, rose 1.5 percent to 9.49 yuan, while Angang Steel was up 2.89 percent to 16 yuan.