Mainland Chinese shares fell 5.2% on Wednesday, reversing most of the gains seen in the previous session.
The benchmark Shanghai Composite index closed down at 4,053.70, after having risen more than 5% on Tuesday. The market had bounced on reports of regulators freezing the pipeline of new listings and allowing pension funds by local governments to invest in the market for the first time.
Shares had started the day higher, but reversed the gains in volatile trade.
China's manufacturing surveys which showed some signs of stabilisation in factory activity did little to boost investor confidence.
The official purchasing manager's index (PMI) was 50.2 in June, the same reading as in May. A reading above 50 indicates an expansion in activity.
A private survey by HSBC, however, which measures activity in China's smaller factories, had a PMI reading of 49.4 in June compared with 49.2 in May.
Markets in Hong Kong were closed for a public holiday to mark the anniversary of the handover of the territory to China.
Asia shrugs off Greece
Shares in the rest Asia were higher, despite Greece missing a payment to the International Monetary Fund (IMF).As expected, Greece has missed the deadline for a €1.6bn ($1.72bn; £1.1bn) payment to the IMF.
But European ministers said they would discuss a fresh proposal from Greece for a new bailout programme.
In Japan, the benchmark Nikkei 225 share index closed up 0.46% at 20,329.32.
In Australia the S&P/ASX 200 rose 1% to 5,515.70. South Korea's benchmark Kospi closed up 1.14% at 2,097.89.
Greece is the first advanced country to fail to repay a loan to the IMF and is now formally in arrears - adding to fears it is at risk of leaving the euro.
Greece is set to vote in a referendum on Sunday over whether or not it should accept its creditors' proposals and has been warned by EU leaders that a 'no' vote would mean leaving the euro.
Analyst Evan Lucas from IG Markets said Greece had "crossed into the great unknown" adding the ballot was "looming as a bigger market mover than Greece defaulting to the IMF".
He warned that if a 'no' vote transpired on the weekend, "Monday morning trade will be worse than Monday 29 June."
Japan's Sony
Shares in Sony steadied after heavy losses in the previous session.They closed up 0.3% having fallen 8% on Tuesday after plans were announced to raise billions of dollars through a sale of shares and convertible bonds.
Technology expert Andrew Milroy of research firm Frost and Sullivan told the BBC the share sale "was all about growing the firm's highly profitable image sensor business".
He said Sony's image sensors were in Apple iPhones and that the firm aimed to get their sensors into "other smartphones in the market".
Separately, a fresh report from Japan's central bank showed that confidence in the country's big manufacturers had picked up in the three months to June to its highest level in a year.
The closely-watched Tankan report also said optimism would continue to improve - underlining the bank's view that Japan's economy is gathering momentum.
