Four people have been arrested by local police in Shenmu county, Shaanxi Province, for spreading rumors that led to a large public gathering that blocked the county government's gate on Monday.

Local residents started to receive the information via social media applications and text messages on July 12 that some high-level officials in the county would be transferred to other places so as to avoid taking the blame for the recent credit crunch that has dampened the local economy and called for a protest around the government building, according to the official website of the county's government.

Thousands of residents showed up and protested against Lei Zhengxi, the county's Party chief, who it was alleged would be transferred. Some even accused Lei of leaving a fiscal deficit of 30 billion yuan ($4.89 billion) in the county's coffers.

However, a press officer surnamed Xue with the county's Party committee denied the rumors to the Global Times Tuesday, adding that Lei is still there and he was actually promoted to be a Standing Committee member of the Yulin Party committee, which supervises the county.

"But we don't know whether his position in the county will be kept," Xue said.

"The gathering started around 8 am and I was there at noon, without seeing posters or slogans. People were just standing there, doing nothing," Ma Maoxiong, a local resident, told the Global Times, adding that he went there under a friend's request.

"While some went there for protest due to private lending, most were onlookers. No conflicts happened between the police and the people," Xue said, adding that protestors have been received by officials in an attempt to solve their problems.

Private lending, widely believed as the fuse of the local economic downturn, has afflicted the county with abundant coal reserves, which have buoyed the economy in the last decade.

The county is the most competitive in the province, and ranks No.36 nationwide in terms of county competitiveness in 2012. The county even benefits its people by implementing an overall free medical care program, the first of its kind in the country.

However, the boom has also caused heavy reliance on private lending. Countless illegal companies have surfaced.

"People here gradually find it is useless to go to work, instead, they prefer to be fed by the interest brought by the private lending. Nearly everyone here plays the game. It runs like a chain," Ma told the Global Times, adding that at least 90 percent of his friends are involved.

The downfall came in late 2012 due to the low prices of coal and a breakdown of the capital chain.

"Many people who have joined the gathering fear that the free medical care service will be canceled, leading to a heavier economic burden. But the fiscal revenue is healthy and the healthcare will remain," Xue noted.