The benchmark Shanghai composite index inched 0.01 percent lower to 1,141.171 points as Shanghai Auto - the country's biggest car maker and owner of a fifth of General Motors Corp's main car plant in Shanghai - resumed trade.
The car firm's shares, the most actively traded on Monday, dived 33.1 percent to 3.45 yuan. They had been suspended since September 29 as the firm worked out details of its share float.
"Investors resolutely sold shares in companies that had joined the state-share scheme," said Chen Huiqin at Huatai Securities. "If this selling continues, the market will trend lower in coming days."
Analysts expected losses in the benchmark index in the near term, but added that it could find support at the psychologically crucial 1,100-point level.
China in April revived a programme to convert $250 billion of non-traded state shares, which account for two thirds of market capitalisation, into freely floated paper. The market has slid since amid fears of a deluge of shares.
Until now, 166 listed firms - or more than a 10th of some 1,400 - have either said they would take part in or have completed their respective reforms.
Among the firms linked to the reform, Tianyao Pharmaceutical Co Ltd closed down 36.3 percent at 4.98 yuan and property developer Zhangjiang Hi-tech Park Development Co Ltd fell 35.3 percent to 3.27 yuan.
Wuhan Iron and Steel Co Ltd, China's third-biggest steel producer, lost 1.7 percent to 3.56 yuan after posting an 18 percent drop in net profit for the third quarter.
Chinese listed companies have until October 31 to report third-quarter earnings.