SHANGHAI (REUTERS) - Police in the rural Chinese city of Yancheng have detained a person suspected of spreading rumours that sparked a three-day bank run, security officials said on the city police force's official microblog on Thursday.

Government, bank officials and residents all referred to a rumour that a local bank branch had turned down a client's request to withdraw 200,000 yuan (S$40,770), which sparked the speculation the bank was insolvent. This prompted a rush among depositors to withdraw cash.

"After a police investigation, a person surnamed Cai who spread the rumours has been tracked down, and during the night on March 26 was detained by authorities. The police are now investigating the matter further," Yancheng police said in a statement posted on China's Twitter-like Sina Weibo.

Though the bank incident is isolated and is not expected to impact the economy, authorities have been trying to crack down on the spreading of rumours, which are seen as a potential threat to the stability obsessed leadership under President Xi Jinping.

The panic that hit the corner of eastern Jiangsu province near Shanghai struck a raw nerve and won national airplay, a possible reflection of public anxiety in China over the financial system after the country's first domestic bond default this month shattered assumptions the government would always step in to prevent institutions from collapsing.

The police statement urged people not to start or spread rumours and said those who did would be pursued under the law by authorities.

Jiangsu Sheyang Rural Commercial Bank and the Rural Commercial Bank of Huanghai - the two small lenders affected by the bank rush - declined to comment and Reuters was unable to verify the rumour.

Local police would not comment further on the case to Reuters.