CHINESE shares have plunged 5.08 per cent, extending a loss from the previous day, as investors dumped stocks on fears of a liquidity crunch in the country's banking system. The benchmark Shanghai Composite Index on Tuesday afternoon was down 99.71 points to 1,863.53, following a 5.30 per cent drop on Monday. Investors have been spooked as cash dries up and the interbank rate - the interest banks charge to lend to each other - has jumped, raising fears they will cut back on loans, which would in turn drag on the economy. "The situation with tight liquidity conditions has not improved," Zhang Yanbing, an analyst at Zheshang Securities, told AFP. "The market is still anxiously waiting for authorities to improve liquidity conditions and stabilise the stock market," he said. The central People's Bank of China added to those worries on Monday when it ruled out providing any fresh cash to bolster markets and ordered banks to get their own houses in order. Meanwhile, the mouthpiece of the ruling Communist Party, the People's Daily, on Tuesday warned the government would not play "wet nurse" to investors by boosting the market. "The securities regulatory commission is not the stock market's 'wet nurse' nor is the central bank," the newspaper said in a commentary. "So-called market-saving and market-boosting acts will not help the stock market, rather they will harm the market," it said, adding such moves would hurt efforts to improve the nation's capital markets. Stocks of securities firms and banks were hardest hit. Founder Securities slumped by the 10 per cent daily limit to 5.30 yuan, while China Everbright Securities tumbled 9.24 per cent to 9.23 yuan. China Minsheng Bank lost 8.70 per cent to 7.77 yuan, Industrial Bank dropped 6.26 per cent to 13.02 yuan and Pudong Development Bank slid 1.86 per cent to 7.38 yuan.