China shares sink to five month lows as new shadow banking regulations weight

China shares tumbled to five-month lows on Monday, driven down by the financial sector which was hit by new State Council guidelines strengthening regulation of the shadow bank lending that has fuelled an explosion of debt since 2008.

The CSI300 of the leading Shanghai and Shenzhen A-share listings ended down 2.3% at 2,238.6 points, its lowest close since July 31. The Shanghai Composite Index shed 1.8%.

 The losses occurred in the strongest Shanghai volumes in almost three weeks. Sentiment was further undermined by a survey that said China's services industries grew in December by the slowest pace in more than two years.

The new regulations include new restrictions on banks' cooperation with trust companies, securities brokerages and other intermediaries with which banks have transacted for off-balance sheet business.