XI'AN - Coal-rich Shenmu county of Northwest China's Shaanxi province has vowed to continue free medical care and education despite rumors that the local government is deeply in debt and cannot provide such services any more.

The Shenmu government has accrued no debts in the past decade and never borrows to pay off its public servants, said Liu Xiaoping, head of the county's finance bureau, on Wednesday.

The government is financially capable of carrying on the free medical care and education, said Liu.

The official move to consolidate public confidence came after rumors circulated online and by text message on July 12 that the economy of Shenmu has suffered a drastic decline and the government is saddled with debts to the tune of billions of yuan.

The rumors also said the government borrowed from the provincial government to pay off its public servants, and that free education and medical care would be suspended.

The rumor-mongers called for people to gather at a square on Monday to protest. Four suspects have been caught by police for spreading the rumors.

Xue Zhilin, an official with the county's education bureau, said that the county government earmarked 164.6 million yuan ($26.7 million) in the first half of this year for providing a 15-year free education for 81,800 students.

Guo Yongtian, deputy head of the county's health bureau, refuted the rumors, saying the government spent 91.26 million yuan on 24,423 local residents who were hospitalized from January to June.

According to Guo, implementation of the free medical care is smooth and will continue in the future.

Few Chinese cities are able to offer free medical care and education like Shenmu, a coal-rich county sited near the sprawling deserts of western China with a population of 400,000.

The county has made a fortune with its over 50 billion tons of coal reserves.

With high financial revenues and relatively smaller population, the county government led the country to provide 12-year free education in 2008 and extended to 15 years in 2011. Free medical care has been implemented since 2009.

As coal prices have dropped significantly in the past year, local financial revenue in the first quarter of this year dropped by 1.4 percent to 1.28 billion yuan.

The business revenues of the country's major coal producers in the first quarter declined 2.6 percent from the same period last year, with their profit down 40.3 percent, according to data from the China National Coal Association.