China shares were heavily sold yesterday as panicked investors cashed in on one of the few sectors that have withstood the recent market turmoil. H shares fell 3.06 per cent and red chips 1.15 per cent, with some losses pared late in the session as European markets opened steady. The Hang Seng Index also recovered earlier losses, closing down 0.82 per cent, or 86.37 points, to 10,335.15 after declining 130.36 points in the morning. Late on Tuesday, United States Federal Reserve chairman Alan Greenspan offered a relatively upbeat assessment of US economic prospects and said the era of corporate scandals was nearing an end. His words failed to reinvigorate Wall Street, which closed yesterday with fresh losses. 'Whenever you panic and want to raise your cash holdings China is always an ideal target,' Deutsche Securities head of China research Lawrence Ang said. H shares have gained 22.43 per cent this year, compared with a 9.31 per cent decline for the Hang Seng Index. Rocky trade in China Mobile has led the red chips down 13.18 per cent for the year. Yesterday's biggest decliners were mainland private chips, which have been the stars of the market. As money managers lower their exposure to equities in favour of cash and bonds, more pressure could be seen in the mainland sector. 'China stocks have outperformed the market so when things are coming down people start taking profits on them,' said South China Securities associate director of institutional sales Geoff Galbraith.