The Shanghai Composite Index fell below 2,700 points, sinking 3.09 percent or 84.50 points to 2,651.61 -- the third loss in a row. The Shenzhen Component Index fell 273.81 points or 2.92 percent to 9,096.97.

Combined turnover inched up to 63.56 billion yuan (9.2 billion U.S. dollars) from 61.55 billion yuan on the previous trading day.

Nearly all heavyweights fell. The top three by market capitalization -- PetroChina, Industrial and Commercial Bank of China and China Construction Bank -- fell more than 3 percent.

China Merchants Bank dived by the daily limit of 10 percent to 21.08 yuan. Haitong Securities and China Pudong Development Bank were down by more than 8 percent to 22.89 yuan and 20.13 yuan, respectively.

Central bank governor Zhou Xiaochuan reiterated in Basel, Switzerland, on Monday that interest rate hikes remained an option to curb inflation, renewing concerns over tighter credit conditions.

Regulators approved on Monday the initial public offerings of two companies, prompting brokers' shares to fall on concerns over market liquidity.

PetroChina slid 3.15 percent to 14.47 yuan and Sinopec fell 4.04 percent to 9.74 yuan, after the global crude price rose to a fresh high of more than 143 U.S. dollars per barrel during trading.

The real estate sector also lost ground. Vanke was down by 6.1 percent to 8.46 yuan, while Gemdale Group lost 7.72 percent to 8.37 yuan and China Merchants Property 6.56 percent to 13.96 yuan.

Xie Hongguang, deputy head of the National Bureau of Statistics, said recently that China's economy might slow down as a result of complicated factors including the global credit crunch, domestic inflation pressure and slower manufacturing and export growth.

Analysts with Huiyang Investment said investors are wary of and highly concerned over the uncertainties in China's economy, policies and markets.

They said the market would remain unstable and probably fall further in the short term before it could be buoyed up by positive news.(Xinhua)