All three major Chinese stock indices plummeted on Monday amid speculation over the possibility of further interest rate hikes.
The benchmark Shanghai Composite Index ended Monday's trading at 3,941.08 points, down 150.36 points, or 3.68 percent, with a daily transaction volume of 143.3 billion yuan (18.9 billion U.S. dollars).
The key stock index, which covers both yuan-denominated A-shares and foreign-currency-denominated B-shares, peaked at 4,131.13 points but slipped to 3,912.42 points.
The Component Index on the Shenzhen Stock Exchange slumped 616.46 points, or 4.5 percent, to close at 13,109.26 points with a turnover of 75.56 billion yuan (9.9 billion U.S. dollars).
The governor of the central bank, Zhou Xiaochuan, said over the weekend that if the consumer price index (CPI), a major gauge of inflation, continued to rise, he could not "exclude the possibility of raising interest rates again".
The People's Bank of China raised rates twice this year, with the latest coming on May 19 when the benchmark one-year deposit rate was raised 27 basis points to 3.06 percent. Also in May, the CPI rose 3.4 percent, the highest in two years.
Eight hundred and seventy companies recorded losses and only 105 registered gains on the Shanghai stock exchange, while the Shenzhen bourse saw 631 losses and 64 gains.
The major heavyweights slumped, with the exception of China Life, the country's largest life insurer, which rose 2.51 percent to 44.53 yuan.
The Industrial and Commercial Bank of China fell 1.59 percent to 4.96 yuan, the Bank of China, went down 1.57 percent to 5.01 yuan, and Sinopec, China's biggest oil refiner, down 5.74 percent to 13.47 yuan.
Despite the market gloom, defence-industry-related shares performed well following the recent promulgation of new guidelines to transform military industrial enterprises into joint-stock companies.
Space Sci-tech soared by its daily limit of 10 percent to 10.35 yuan, Space Machinery and Electronics went up 1.86 percent to 14.26 yuan, and Chengfa Sci-Tech rose 3.28 percent to 26.79 yuan.
On Monday, the Hushen 300 Index, which tracks 300 companies on the Shanghai and Shenzhen stock exchanges, closed at 3,877.59 points, down 173.84 points, or 4.29 percent, from the previous close.