China's equity market slumped on Monday after the market watchdog said earlier that initial public offerings will soon be resumed after a hiatus of more than one year, sparking fears of a possible capital drain.

But many investors are expecting that a reform aiming to let market forces play their role will help revive the sluggish A-share market.

Smaller companies led the decline on Monday. The ChiNext Index, tracing stocks on the Growth Enterprise Board - China's Nasdaq-style board - plummeted by 8.26 percent, the biggest drop since it was introduced in 2009.