SHANGHAI - Stocks on the Chinese mainland fell on Thursday, driving the benchmark index to the lowest level since March 2009.

The retreat came on concern that slowing economic growth and divisions among European leaders over a rescue strategy is threatening the outlook for earnings.

Jiangxi Copper Co slid to a 15-month low as copper futures tumbled 5.5 percent in Shanghai.

China Southern Airlines Co led losses for carriers after China Business News said the aviation regulator reduced its estimates for the growth in passenger volumes. China Citic Bank Corp and China Vanke Co paced declines for financial companies after the banking regulator said risks stemming from private lending must be "strictly controlled".

"Investors are seeing a clearer picture of the economic slowdown at home and globally, which may lead to market fluctuations," said Liu Jianwei, a fund manager at Bosera Asset Management Co, which oversees more than $29 billion. The People's Bank of China (PBOC), the central bank, is unlikely to loosen its monetary policies because inflation remains high, Liu said.

The Shanghai Composite Index lost 46.1 points, or 1.9 percent, to 2331.37 on a third day of declines and closed at the lowest level since March 25, 2009.

The CSI 300 Index slid 2.4 percent to 2520.53. Global stocks fell as France and Germany disagreed over the role of the European Central Bank in leveraging a rescue fund and banks lobbied against forced recapitalizations and larger writedowns of Greek debt.

The Shanghai index has plunged 17 percent this year, driving down estimated price earnings to a record low of 10.8 times, according to data compiled by Bloomberg. China has raised interest rates three times in 2011 and ordered lenders to set aside a bigger portion of their deposits to curb inflation that's near a three-year high.

Consumer prices in the world's second-biggest economy increased 6.1 percent in September from a year earlier, the National Bureau of Statistics said last week. The government's full-year inflation target is 4 percent.

The Shanghai Composite has dropped 4.1 percent this week on reports showing the economy is slowing.

China's economic expansion cooled to 9.1 percent in the third quarter from 9.5 percent in the previous three months. In September, foreign direct investment grew at the slowest pace in three months, as companies pared spending amid concerns that the global recovery is faltering.

A gauge of material companies in the CSI 300 plunged 3.3 percent, the most among the 10 industry groups.

Jiangxi Copper slid 4.4 percent to 25.20 yuan ($3.96), the lowest close since July 15, 2010. Yunnan Copper Industry Co dropped 2.4 percent to 17.18 yuan.

The nation's aviation regulator cut its 2011 growth estimate for passenger numbers to 8 percent from 13 percent, China Business News reported on Thursday, citing a report by the Civil Aviation Administration of China (CAAC ).

International travel and demand for cargo shipments are weak and domestic growth has slowed, the newspaper said.

CAAC forecast this year's cargo and mail volume may be unchanged from last year, compared with a previous growth estimate of about 12 percent, according to the newspaper.

On Wednesday, the Economic Observer reported that an auto industry group cut its forecast for growth of vehicle sales to as much as 3 percent this year, from 5 percent.

China's central bank will start a second round of investigation into the nation's private lending and may introduce a monitoring system in the future, the 21st Century Business Herald reported on Thursday, citing an unidentified person close to the PBOC.

Risks stemming from China's shadow banking system and private lending must be "strictly controlled", and such loans will be curbed, the head of the nation's banking regulator said.

Bloomberg News

(China Daily 10/21/2011 page16)