Chinese stocks plunged more than 5 per cent in the biggest daily fall for nearly four years on Monday, amid growing fears of a credit crunch.
The key Shanghai Composite Index, which tracks shares traded in local and foreign currencies, closed at 1,963.24 points, down 5.3 per cent, or 109.86 points.
The smaller Shenzhen Component Index fell 6.73 per cent, with bank stocks among the biggest losers on the two markets.
The People's Bank of China, the central bank, on Sunday said the government would maintain its prudent monetary policy and fine-tune it "at a proper time," dashing hopes of any major loosening of credit.
The central bank had taken a "tough line" with state-run commercial banks despite recent rises in interest rates for interbank loans, the official Xinhua news agency said.
"It refused to inject cash into the financial system in the past week despite a spike in domestic interbank lending rates and evidence that the economy is slowing," the agency said.
The central bank was trying to "force domestic lenders to stop channelling money into the informal banking sector... which has boomed in recent years and fuelled concerns about financial risks," it said.
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