While analysts said the move was just a withdrawal of surplus cash in the system, markets feared the worst, taking it as a sign the central bank could be getting ready to use more forceful measures to cool growth and fight inflation, such as raising benchmark lending rates.
The move was accompanied by the biggest weekly net drain from money markets in 11 weeks.
The prospect of a tougher policy stance from Beijing sent Chinese shares tumbling and hit a range of commodities, as investors feared that putting the brakes on growth could weaken the appetite of the world's third-largest economy for steel, copper and other resources needed to fuel it.
But analysts said the move should be seen more as an effort by the People's Bank of China (PBOC) to even out the flow of liquidity into the system, in particular to press banks not to repeat the start-of-the-year rush to lend that marked 2009.
The PBOC on Thursday sold three-month bills at a yield of 1.3684 percent, up 4.04 basis points from 1.3280 percent last week, the level it has kept over the past four months.
The PBOC is set to mop up a net 137 billion yuan from the money market via bills and bond repurchase agreements this week, its biggest weekly drain in about four months.
Over the past eight months, the PBOC's assets, or its reserves, have risen by around 1.6 trillion yuan ($234 billion) while its liabilities -- bills, bonds, repurchase agreements and reserve requirements -- were roughly unchanged.
Traders said the PBOC's move appeared to be aimed at banks as a warning that it would not tolerate excessive lending in the early months of 2010 like the banks did in the same period of 2009.
Concerns about rising inflation and asset bubbles in the key property sector were also among reasons for the move, they said.
On Wednesday, China's central bank said that it would pay particularly close attention to the property market in 2010 while managing inflationary expectations.