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December 21 2012, 8:26PM

Hong Kong shares ended 0.68 per cent lower on Friday as traders grew nervous about US fiscal cliff talks after a vote to push through a back-up plan was scrapped owing to a lack of support.

The benchmark Hang Seng Index fell 153.49 points to close at 22,506.29 on turnover of HK$62.03 billion ($A7.66 billion).

Republican House Speaker John Boehner late Thursday scrapped a vote on a bill that would have extended tax cuts for all Americans earning less than $1 million even if a wider deal could not be struck.

The move, which he described as his "Plan B", was dropped because he did not have enough support, fuelling concerns a wider deal cannot be achieved.

Now Democrats and Republicans must come up with a budget before the start of January that will cut the country's deficit with less painful measures than the huge tax rises and spending cuts set to come into effect.

"Investors are a bit frustrated by the back-and-forth with the fiscal cliff. Most are assuming that eventually there will be a compromise, as the consequences of going over the cliff would be unbearable," said Jackson Wong, an investment manager at Tanrich Securities.

On the Hang Seng ICBC, the mainland's largest state-owned lender, dropped 2.1 per cent to HK$5.48 and Hong Kong property developer Sino Land slid 1.6 per cent to HK$13.86.

Galaxy Entertainment lost 2.1 per cent to HK$30.30 on profit-taking and Sands China closed down 0.6 per cent at HK$34.05.

However, debutant state-owned contractor China Machinery Engineering Corp. surged 16.7 per cent to HK$6.30.

Chinese shares ended down 0.69 per cent. The benchmark Shanghai Composite Index fell 15.04 points to 2,153.31 on turnover of 84.6 billion yuan ($A13.03 billion), after touching a five-month high of 2,190.40 during intra-day trade.

"The major driver of this round of rises in China shares are the bank stocks," Wang Weijun, an analyst at Zheshang Securities, told Dow Jones Newswires.

"Now, the sector has met strong resistance after a recent rally, so the broader market is being stuck in consolidation."

Banks were also dealt a blow by a regulatory notice telling domestic lenders to curb sales of wealth management products to ward off potential systemic risks. The move fuelled concerns over revenue growth.

China Construction Bank fell 2.65 per cent to 4.41 yuan and China Citic Bank dropped 2.20 per cent to 4.01 yuan.

Among property developers China Enterprise lost 3.26 per cent to 4.75 yuan while Poly Real Estate fell 1.54 per cent to 12.12 yuan.