SHANGHAI: China's blue-chip stock index closed at its lowest level in more than three months on Thursday amid investor concern over possible policy tightening and rising tensions between China and major Western countries over Xinjiang.

The Shanghai Composite index finished down 0.1% at 3,363.59 points. The blue-chip CSI300 index edged just 0.05% lower, but that was enough to push it to its lowest close since Dec. 11.

Financials lost 0.55% and consumer staples fell 0.68%.

The smaller Shenzhen index edged up 0.05% and the start-up ChiNext Composite index closed 0.81% higher.

The Shanghai stock index has now lost 9.86% from a Feb. 18 high, putting it a whisker short of the 10% drop typically used to define a correction for the second time this month.

The CSI300 is firmly in a correction, having sunk nearly 17% over the same period.

Chinese shares have been dogged by persistent investor concerns about policy tightening as Beijing seeks an exit from pandemic-era loose policies now that the world's second-largest economy is back on solid footing.

"All of us are kind of waiting for the next catalyst to move in any direction in any real true fundamental fashion," said Andy Maynard, head of equities at China Renaissance.

On Thursday, China's central bank said it will maintain credit support and stability for small and micro firms, days after its governor said monetary policy needs to focus on supporting economic growth in a targeted way while also reducing financial risks.

Adding to pressure on sentiment, the European Union, United States, Britain and Canada this week imposed sanctions on officials in China's Xinjiang region over allegations of human rights abuses, prompting retaliatory sanctions from Beijing.

On Thursday, foreign retail brands came under criticism on social media in China, after a government call to stop foreign brands from tainting China's name over Xinjiang.

The yuan weakened to 6.5347 per US dollar from a previous close of 6.525.