At closing bell, the benchmark Shanghai Composite Index declined 1.08%, or 38.61 points, to 3,531.50. The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 1.8%, or 43.64 points, to 2,375.86. The blue-chip CSI300 index fell 0.99%, or 54.27 points, to 5,441.16.

Jitters are appearing in China's $11 trillion equity market after the gauge surpassed its bubble peak in 2015.

China reported 85 local confirmed infections on Jan. 10, including 82 in the northern province of Hebei that borders the capital. Shijiazhuang, a city of 11 million, was locked down and its residents tested en masse for the coronavirus.

Lithium battery related stocks declined. China's top electric-car battery maker Contemporary Amperex Technology lost 3.6% after the company reported an explosion at a factory in Hunan province that caused one death and injured 20 others. Shenzhen Senior Technology Material, a producer of lithium battery component, plunged 16.2% to 29.59 yuan.

Shares of carmakers rallied amid rising demand and strong policy support, especially after Baidu and Zhejiang Geely Holding Group announced Monday that they established an intelligent electric vehicle company. BYD added 3.2% to 234.86 yuan, Great Wall Motor soared 8.5% to 46.12 yuan, both at record highs.

ECONOMIC NEWS: China Consumer Prices Climb 0.2% On Year In December-China consumer prices were up 0.2% on year in December, the National Bureau of Statistics said on Monday, following the 0.5% contraction in November. On a monthly basis, inflation was up 0.7% following the 0.6% decline in the previous month.

CURRENCY NEWS: China's yuan eased against the dollar as the central bank set a softer midpoint. The People's Bank of China set the midpoint rate at 6.4764 per dollar prior to market open, 56 pips or 0.09% weaker than the previous fixing of 6.4708. The spot yuan was changing hands at 6.4841, 81 pips weaker than the previous late session close.

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