Chinese stocks closed lower on Tuesday as the tightening liquidity affected investors' appetite for risk.

The benchmark Shanghai Composite Index dropped 0.43 percent to close at 3,252.95 points. The smaller Shenzhen index closed 0.18 percent lower at 10,563.29 points.

The ChiNext Index, China's NASDAQ-style board of growth enterprises, lost 0.16 percent to close at 1,944.36 points.

Combined turnover retreated to 465.8 billion yuan (67.7 billion U.S. dollars) from 537.3 billion yuan the previous trading day.

China's central bank Tuesday, for the third consecutive business day, skipped the open market operation of reverse repos, a process where it purchases securities from banks with an agreement to sell them back in the future.

In essence, the decision to halt reverse repos means a let up in the injecting of short-term funds into the banking system, leading to a net cash withdrawal, as previous maturing reverse repos Tuesday drained 70 billion yuan from the market.

Shares related to environment protection declined the most. Tianjin Capital Environmental Protection Group lost 1.08 percent to close at 8.24 yuan, and Shenwu Environmental Technology dropped 2.68 percent to close at 33.44 yuan. Endi

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