SHANGHAI - Stocks on the Chinese mainland fell for a fifth day on Wednesday.

The benchmark index slid 10 percent from this year's high, on concerns the government will intensify curbs on the property market and tighter monetary policies may hurt earnings.

Industrial and Commercial Bank of China Ltd (ICBC) and China Construction Bank Corp led declines among lenders after Standard & Poor's said policy tightening may spur a jump in credit losses and weaken profitability. China Vanke Co slid to the lowest in eight months after Shanghai Securities News reported China will curb speculative demand for homes. PetroChina Co, the nation's largest energy company, rose 1.7 percent on higher oil prices.

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"Monetary policies and property tightening will be in place in the foreseeable future," said Wei Wei, an analyst at West China Securities Co in Shanghai. "Though the external environment is improving, there's not much room for stocks to move because of domestic tightening policies."

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, dropped 25.32 points to 2741.74 at the 3 pm close, the lowest close since Jan 26. It has fallen 10 percent from this year's high set on April 18, and analysts say that's a sign the market has entered a correction. The CSI 300 Index retreated 1.2 percent to 2990.34.

The Shanghai gauge erased this year's advance of as much as 8.9 percent on May 23 after a preliminary report showed manufacturing may slow this month. The central bank has raised the reserve requirement ratio for banks 11 times and boosted rates four times since the start of 2010 to cool inflation, which has exceeded the government target each month this year.

Non-performing loans by Chinese banks could reach 5 to 10 percent of total advances in three years if "lending rates rise significantly and government support for project loans turns out to be negligible", S&P said in a report on Wednesday.

"Inflation and a possible economic slowdown stemming from tightening measures could lead to a spike in credit losses over the next two to three years," said Qiang Liao, an analyst at the rating company.

China will curb speculative demand for homes and maintain basically stable real estate prices to control the property market, Shanghai Securities News reported, citing Ni Hong, director of the housing reform and development department of the Ministry of Housing and Urban-Rural Development.

China needs to continue with its tightening monetary policy as excess liquidity remains high with capital inflows and expansionary fiscal policy exacerbating the situation, according to Societe Generale.

The central bank may raise interest rates twice more this year and increase lenders' reserve-rate requirements three more times, Societe Generale said in a report.

Bloomberg News