Trading on China's mainland benchmark index - the Shanghai Composite - was suspended after the market dramatically plunged 7%.
Trading was initially halted for 15 minutes after the stock market fell by 5%, triggering an automatic 15-minute trading suspension under a new system created to curb volatility.
But shares continued to fall, leading regulators to end trading early.
A manufacturing survey earlier pointed to more bad news for the economy.
The Caixin/Markit purchasing managers' index (PMI) slipped to 48.2 in December, marking tenth consecutive month of shrinking factory activity in the sector.
A reading below 50 suggests a contraction in the sector, while anything above 50 suggests growth.
The private PMI survey, which focuses more on small and medium-sized businesses, came after an official survey on Friday, which looked at larger companies, suggested a fifth month of shrinking factory activity.
The Shanghai Composite fell 6.9% to 3,296.66 points before trading was halted for the day. Under the new circuit breaker mechanism, moves of 7% from the previous session's close would trigger a trading suspension for the day.
The measures came into effect for the first time on Monday and were created after the stock market's turbulent sell-off over the summer.
Hong Kong's Hang Seng index was down by 2.8% to 21,293.13.
The rest of the region followed China lower on the start of the new year.
Japan's benchmark Nikkei 225 index closed down 3.1% to 18,450.98 as a stronger yen also weighed on shares of major exporters.
The market is also catching up with last week's declines in the US, after being closed for the last two sessions.
Australia's S&P/ASX 200 index closed down 0.5% to 5,270.50, while South Korea's Kospi index finished lower by 2.2% to 1,918.76 points.
A jump in oil prices boosted Australia's energy sector with shares of Woodside Petroleum up 3%.
Brent crude gained 3%, rising as high as $38.40 after Saudi Arabia's execution of a prominent Shia Muslim cleric ignited tensions in the region, raising concerns among investors about oil supplies.