China's stocks tumbled 2.92 percent on Thursday as the latest inflation data heightened concerns of a possible interest rate hike around Spring Festival which falls on Feb. 3.

The benchmark Shanghai Composite Index shed 2.92 percent, or 80.45 points, to close at 2,677.65 points.

The Shenzhen Component Index lost 4.14 percent, or 499.81 points, to end at 11,566.74 points.

Combined turnover expanded to 168.1 billion yuan (25.47 billion U.S. dollars) from 154.03 billion yuan on the previous day.

China Thursday reported gross domestic product (GDP) growth of 10.3 percent in 2010, with inflation rising 4.6 percent year on year in December.

Although the inflation data was within market expectations, many now fear that the monetary tightening will be more stringent than previously thought, said Liu Dezhong, an analyst with the China Minmetals Securities Brokerage Co., Ltd.

He echoed the views of Li Daokui, a central bank monetary policy advisor, that an interest rate hike is possible around Spring Festival.

Real estate developers fell on concerns that a trial run of a property tax would dampen the market. Poly Real Estate Group dropped 6.33 percent to 13.03 yuan. China Vanke Co., the country's biggest property developer by market value, fell 4.68 percent to 8.14 yuan.

Metal producers slid on concerns that tightening measures would cut demand for raw materials. Jiangxi Copper Co., China's biggest producer of the metal, slumped 5.88 percent to 36.96 yuan. Yunnan Copper Co. dropped 6 percent to finish at 24.41 yuan.

The Aluminum Corporation of China Ltd, the world's second largest aluminum producer, bucked the trend by gaining 4.3 percent to end at 10.44 yuan, boosted by news that it gained rights to consolidate parts of the nation's rare earth resources sector.

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