BEIJING - Chinese shares plunged on Monday and closed below a key psychological mark over worries about the liquidity crunch in the financial system and subdued strength in the world's second largest economy.

The benchmark Shanghai Composite Index tumbled 5.3 percent to end at 1,963.24, the lowest point in nearly seven months, while the Shenzhen Component Index pummeled 6.73 percent to 7,588.52.

China's central bank on Monday urged lenders to control risks from credit expansion after the country's short-term interbank rates rocketed to levels way above normal levels during the past two weeks, signalling no helping hand to ease the cash crunch that investors fear would exacerbate the current economic slowdown.