By Chao Deng

Stocks in China fell a second consecutive day as a government-engineered recovery proved fleeting and surprisingly strong growth data dimmed hopes for more economic stimulus.

The Shanghai Composite ended down 3% at 3805.70, continuing to shed gains from a three-day rally that had lifted the benchmark roughly 13%. The index's losses Tuesday and Wednesday total 4%, putting it 26% below a seven-plus-year high it reached on June 12.

The smaller Shenzhen Composite fell 4.2% to 2058.84, and the small-cap ChiNext board shed 5% to 2590.03. Both are down about a third since their respective peaks in June. A gauge of Chinese firms listed in Hong Kong fell 1.3%, dragging the Hang Seng Index down 0.3% to 25055.76.

Trading has begun again this week in hundreds of mainland firms whose shares were suspended during the downturn. The return of those shares "pulled money away from other stocks...causing the overall market to go down," said Gerry Alfonso, director of trading at Shenwan Hongyuan Securities.

About a quarter of the firms listed in Shanghai and Shenzhen remained halted as of Wednesday, down from more than half at the height of the freeze earlier this month. About 696 mainland firms remain suspended, according to FactSet. The majority of firms returning to trade Monday and Tuesday hit regulators' upward daily limit of 10%, whereas only a fraction of those did on Wednesday.

Another reason for Wednesday's losses is that "some investors decided to take profits...as there is no clear indication of how long the rally was going to last," according to Shenwan Hongyuan's Mr. Alfonso.

The fleeting recovery of the China market, which had trillions wiped out of it in recent weeks, suggests investor confidence is far from returning in full. The continued slide reflects deepening doubts that Beijing can turn things around, despite heavy intervention in recent days.

China's annualized economic growth held steady at 7% in the second quarter, according to official data released Wednesday, a level few economists expected given signs that Beijing's policies to get the world's second-largest economy back in gear had fallen short.

The relatively strong reading suggests that the government may have less incentive to boost investment, which could cool interest in blue-chips stocks that would benefit, such as state-owned banks and oil firms, said Zeng Xianzhao, manager at Chongqing-based Nuoding Asset Management.

"Besides support from state-backed funds, the market needs more capital from institutional and retail investors for sustained recovery," he said.

"The stock market disaster may prompt some investors to reflect on whether it was rational to blindly believe in 'growth stocks.' It will take a relatively long time for investor confidence to restore."

Elsewhere, stocks gained as a result of expectations Greece's Parliament would approve a rescue deal for the country that was announced Monday. Approval is seen as likely to make it possible for Greece to remain in the euro currency bloc, although because the package contains some EUR9 billion of tax increases and spending reductions over three years, its passage wasn't assured.

The euro weakened against the U.S. dollar, slipping to $1.0947 by early afternoon in New York from $1.1009 late Tuesday. The dollar was at Yen123.87, compared with Yen123.39.

Japan's Nikkei Stock Average finished up 0.4% at 20463.33, Australia's S&P/ASX 200 was up 1.1% at 5636.20 and South Korea's Kospi gained 0.7% to 2072.91. India's BSE Sensex Index rose 1% to 28198.29.

In Japan, shares of drug makers gained as investors moved into stocks seen as less dependent on economic developments. Eisai added 3.0%, while Astellas Pharma gained 1.8% and Chugai Pharmaceutical rose 2.5%.

In Australia, mining stocks were mixed as investors responded to a decline in iron-ore prices. According to the Steel Index, the price of the steelmaking raw material fell 1% Tuesday to $49.40 a metric ton, according to the Steel Index.

Iron-ore producer Fortescue Metals Group shed 0.8% for the day, while Rio Tinto, which is more diversified, nudged up 0.1%.

Gregor Stuart Hunter and Yifan Xie contributed to this article.

Write to Chao Deng at Chao.Deng@wsj.com

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