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The People's Bank of China (PBC), the country's central bank, in a rare case, has filed a letter to the public security authority concerning rumors that circulated over the weekend claiming the PBC will make cuts to the required reserve ratio (RRR) starting Monday.

The act of "fabricating and publishing false information" will be investigated and punished accordingly, according to a commentary by the Financial News, a publication under the PBC. The commentary was forwarded by the central bank's Weibo account on Tuesday. 

RRR cuts are widely regarded as a policy tool that can release more cash and encourage capital lending to the private sector. The rumors were originally posted under the name of a reporter from the Xinhua News Agency and had been widely forwarded among private WeChat groups, the commentary said. 

The commentary warned that if the practice of fabricating false financial information causes "serious consequences," those who posted will face criminal sanctions based on China's criminal law. They could be jailed for up to five years or be fined 10,000 to 100,000 yuan, or a combination of both penalties. 

Cao Yuanzheng, chief economist at Bank of China International, told the Global Times on Tuesday that "the police probe shows Chinese regulators' determination to regulate the domestic capital market, guarantee market stability and safeguard the interests of private investors." 

"Rumors are one of the roots of financial criminals and corruption, which pose financial risks," Cao noted. 

While rumor-mongers cash in on false information, spreading false claims can lead to losses for small and medium investors, spark market fears, threaten China's financial stability, severely interfere in market order and even lead to drastic fluctuations in the capital market, industry insiders said. 

"The police probe is a warning to market speculators," Cao added.