Shanghai's key stock index fell to the lowest in 14 months in the morning session on concerns over worsening debt crisis in Europe and that tightening policies may continue in China after new lending in August increased.
The benchmark Shanghai Composite Index dropped 1.43 percent to 2,462.1 points, the lowest level since last July. Turnover stood at 29.7 billion yuan (US$4.64 billion).
China's central bank said Monday that the country will still prioritize stabilizing prices and continue its prudent stance on monetary policies.
Analysts said the bank may increase withdrawal of money through open market operations and a possible interest rate hike may occur this month or in October.
Meanwhile, investors fear that worsening debt crisis in the Europe may halt global economic recovery and hurt China's export. Greece could default on its debt and rating agencies may cut the credit ratings of French banks because of their holdings of Greek bonds.
Metal producers led the decliners. Jiangxi Copper Co shed 2.7 percent to 30.49 yuan. Aluminium Corp of China lost 2 percent to 8.69 yuan.
Banks were weak. Industrial and Commercial Bank of China fell 1.2 percent to 4.13 yuan. China Construction Bank dropped 1.3 percent to 4.51 yuan.
