Chinese shares were lower on Monday in what investors see as a sign that equity markets may be volatile again this week.

Shanghai Composite Index closed 0.82% lower on Monday at 3,205.99, having slipped by more than 3% in early trade.

Shares slipped ahead of economic data that are expected to point to a further slowdown in China's economy.

Over the weekend, the China Securities Regulatory Commission (CSRC) chairman Xiao Gang (肖钢) met with 50 securities houses that were asked to contribute 20% of their net assets to help stabilize the stock market. They were told to lend 100 billion renminbi (US$15.68 billion) to the China Securities Finance (CSF), the state margin lender tasked to buy A shares during a market slump, according to an internal government source.

The news, however, provided little support to stock markets on Monday. A total of 21 brokers were ordered to lend 120 billion yuan to CSF in early July when the market slumped over 30% in three weeks since share prices peak on June 12.

China has also cracked down on people accused of spreading online rumours. Four senior executives at CITIC Securities, one staff member and one financial journalist were among those arrested, according to the state-owned Xinhua News Agency.

The four CITIC executives include managing directors Xu Gang (徐刚) and Liu Wei (刘威), head of financial business Fang Qingli (房庆利) and alternative investments head Chen Rongjie (陈荣杰).

A-shares plunged another 30% over ten days from August 18 to around 2,900 points. It recovered 10.5% last Thursday and Friday.

"Many leading companies are trading at extremely low levels. Ongoing fundamental reform programmes should start to bear fruit, especially as government-owned companies, a large percentage of the economy and stock market indexes, start to get to grips with restructuring," David Gaud, senior fund manager and global investment specialist of Edmond de Rothschild Asset Management writes in a research note.

An example is China Eastern Airlines, which has just welcomed Delta Airlines as a shareholder and given the group a seat on its board, he points out.

"The current crisis can only accelerate the reform movement. And a possible government reshuffling in September could send a strong signal," says Gaud.