At close, the Shanghai Composite index was down 0.55pc at 2,867.92.
The blue-chip CSI300 index was down 0.54pc, with its financial sector sub-index shedding 0.56pc, the real estate index falling 0.53pc. The consumer staples sector gained 0.24pc and the healthcare sub-index rose 1pc.
The smaller Shenzhen index ended down 0.95pc and the start-up board ChiNext Composite index was weaker by 0.882pc.
Leading the decline, the CSI IT index and CSI telecommunications services index shed 2.2pc and 2.1pc, respectively.
A US State Department official said the rule, which currently includes chips designed by Huawei and doesn't cover shipments if they are sent directly to the company's customers - seen by industry lawyers as a loophole, will be watched by regulators and "certainly make any changes that we think are necessary."
Investors also awaited China's parliamentary meeting, where Premier Li Keqiang is expected to make a state-of-the-nation style address and reiterate Beijing's long-standing vow to keep the yuan stable.
China is expected to unveil stimulus measures to spur its economy battered by the novel coronavirus, as it grapples with problems from surging unemployment to worsening US ties.
Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.23pc, while Japan's Nikkei index closed down 0.21pc.
At 07:09 GMT, the yuan was quoted at 7.1018 per US dollar, 0.12pc weaker than the previous close of 7.093.
As of 0710 GMT, China's A-shares were trading at a premium of 25.85pc over the Hong Kong-listed H-shares.