China's benchmark Shanghai Composite Index lost 205.78 points to 3,004.13. The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 6.97 percent, or 131.18 points, to 1,751.28.

The Shanghai market nosedived 8.49 percent on Monday, the biggest fall for more than eight years, since it ended down 8.84 percent on February 27, 2007.

It sent shockwaves around global bourses, with the Dow Jones Industrial Average in New York plunging more than 1,000 points, or six percent, while European share markets tumbled.

Tokyo was down 4.13 percent in early trade Tuesday, while Sydney opened 1.41 percent lower.

The falls in Shanghai have defied a government rescue package launched after a huge debt-fuelled rally, which saw the market rise 150 percent in 12 months, then collapsed in mid-June.

In the latest move, Beijing said on Sunday it will allow the state pension fund -- which had 3.5 trillion yuan of assets at the end of 2014 -- to buy stocks.

"Markets across the globe are in kind of a vicious circle now," Gui Haomin, an analyst from Shenwan Hongyuan, told AFP, predicting Chinese shares will keep falling for the immediate future.

Investors are now waiting to see if the "national team" -- meaning entities buying stocks for the government -- will intervene to prop up the market and if China's central bank will further loosen monetary policy. (++++)

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