New Express published a front-page apology on Sunday after one of its reporters who is being detained due to allegations of defamation made a televised confession.
The Guangzhou newspaper had previously printed editorials on its front page appealing to police in Hunan province to release Chen Yongzhou, stating there was no evidence of wrongdoing.
The U-turn came after the journalist appeared on China Central Television on Saturday and said he had received money to write defamatory articles about Zoomlion Heavy Industry Science & Technology Development.
The heavy-engineering company is based in Changsha, Hunan province.
In Sunday's apology, New Express said it had failed to properly review Chen's articles before publication, which had caused serious harm to public trust in the media.
It had been taught a profound lesson, the editorial read, and added, "We'll improve our publication process, ask our reporters to respect facts and laws and abide by journalist professional requirements and ethics."
Chen was taken into custody at his home in Guangzhou on Oct 18 and accused of damaging Zoomlion's reputation.
China Daily was unable to contact his lawyer on Sunday.
According to the CCTV report, the 27-year-old delivered his confession from Changsha No 1 Detention Center.
He admitted posting more than 10 unverified stories that the company had losses of State assets, abnormal sales practices and false financial reporting between September 2012 and August this year.
In May, it said, a middleman bribed Chen to post a story about the company's advertisement, but it was the newspaper that wrote it instead of the suspect as he was on a business trip.
The article said Zoomlion had spent "513 million yuan ($84.33 million) on advertisements", arousing a sensation in the industry and causing Zoomlion to deny the claim, according to the report.
Chen said in the CCTV interview the newspaper quoted the company's statement out of context. The journalist, who has worked for the newspaper since 2009, said he barely verified the materials provided by others and just revised some parts before posting.
The articles were forwarded a large number of times through his account on Sina Weibo, Chinese largest Twitter-like service, CCTV reported.
"I knew my reports might damage the company's reputation, but I never thought the influence would be so serious," CCTV quoted Chen as saying, adding he received about 500,000 yuan from the middleman. The middleman was not identified in the broadcast.
In the interview, Chen said he regretted his behavior and hoped other journalists would learn a lesson from him.
Changsha police said the case is still under investigation.
Guo Xuehong, vice-president of Zoomlion, said he had read the apology of the newspaper but declined to comment further. "What we will do is to wait for the result from the police and other judicial organs," he said.
New Express, known for its investigative journalism, is popular among readers in the Pearl River Delta region. The newspaper declined to comment when contacted by China Daily on Sunday.