BEIJING, Dec. 16 -- Chinese shares closed lower on Monday as the country decided to expand its New Third Board and HSBC's preliminary purchasing managers' index (PMI) slowed to a three-month low.

The benchmark Shanghai Composite Index dropped 1.60 percent, or 35.21 points, to finish at 2,160.86.

The Shenzhen Component Index lost 1.86 percent, or 157.15 points, to finish at 8,272.67.

Combined turnover on the two bourses increased to 189.1 billion yuan (30.94 billion U.S. dollars) from 165.02 billion yuan on the previous trading day.

According to an official statement released on Dec. 14, China's Cabinet announced that the OTC market, a national share transfer system for small and medium enterprises (SMEs), also known as the New Third Board, will be expanded to cover all innovative and promising companies.

Analysts said the decision triggered investors' worries over capital transfer, which pulled down stock performances during the trading day.

HSBC released its flash manufacturing PMI for December on Monday, which eased to 50.5, marking a three-month low in growth rate. As a result, manufacturing shares ended the trading day with big losses, along with declines in the logistics, textile and transportation sectors.

Automobile industry shares dropped after Tianjin Municipality announced restrictions on automobile purchases and traffic controls on Dec. 15. SAIC Motor Corp. slumped 5.4 percent to 14.55 yuan per share, and Chongqing Changan Automobile lost 6.15 percent to 11.91 yuan per share.

The food security sector bucked the trend, with a strong performance after China said it will continue to stress national food security in 2014, according to a statement issued last Friday after the conclusion of a four-day central economic work conference.

The ChiNext Index, a Nasdaq-style board tracking China's growth enterprises, rebounded 0.14 percent to close at 1,279.96 on Monday.