A financial journalist confessed that his report on Chin's stock markets was based on hearsay and "inflicted huge losses to the country," as China cracks down on rumormongering and other violations to stabilize the volatile markets.
Wang Xiaolu, a journalist for the Beijing-based Caijing Magazine, has been detained and is suspected of colluding with others in fabricating and spreading fake information on the securities and futures markets, the Xinhua News Agency reported Monday.
Wang confessed on a China Central Television program that he wrote a report on the Chinese stock markets based on hearsay and his own hunches without verification.
He admitted that the false information had "caused panic and disorder at the stock markets, seriously undermined market confidence, and inflicted huge losses on the country and investors."
A July 20 report written by Wang claimed that the China Securities Regulatory Commission (CSRC) was considering withdrawing funds from the A-shares market. The CSRC immediately denied the report. The Shanghai index still fell by 8.48 percent on July 27.
Liu Shufan, a CSRC official, was also held for suspected insider trading, taking bribes and forging official seals. Liu allegedly took advantage of his position to secure an approval from securities authorities for a publicly-listed company and help jack up the value of the company's shares, Xinhua said.
Four senior executives of CITIC Securities, China's leading securities dealer, were also held for suspected insider trading.
"The latest detentions prove China's determination to stabilize the markets," said Hu Xingdou, an economics professor at the Beijing Institute of Technology.
"It should also be noted that the measures taken must be consistent with laws and regulations," Hu told the Global Times, adding that concrete evidence is needed to prove Wang's "malicious" intent in publishing the report.
Wang could be sentenced to up to five years in prison. His confession has sparked discussions, with sympathizers arguing that Wang made a technical mistake and that he should not be severely punished.
"Many details remain missing in Wang's case - whether he accepted bribes to fabricate the report or simply made some errors," said professor Liu Hailong of the Renmin University of China.
Last week, Caijing said that it "supports journalists' right to do their duty under the law."
Amid the crackdown, China has issued several measures to stabilize the markets, including loosening margin trading rules - using borrowed money to invest in the markets - and banning major shareholders from selling within six months as well as a crackdown on "malicious" short selling.
The benchmark Shanghai Composite Index dipped 0.82 percent to finish at 3,205.99 points, and the Shenzhen Component Index shed 2.32 percent to close at 10,549.16 points on Monday.
Li Daxiao, chief economist of Shenzhen-based Yingda Securities, said that State measures to stabilize the markets have saved the markets from suffering further losses.
"These measures proved to be critical as they injected liquidity into the equity markets, thereby saving the markets from plunging further," Li told the Global Times.
The State measures also helped companies that had suspended trading activities to resume, which restored the regular functions of the stock markets, Li added.
In July, about a third of companies listed on the Shanghai and Shenzhen bourses halted trading amid the continuous drop in share prices. Around 200 companies continued to suspend trading in late August, reports said.
Without these State measures, the benchmark Shanghai index could have dropped below 2,850 points, the lowest this year, Li said.