Ningbo developer fails under weight of HK$4.4b debt

A closely held Chinese real estate developer with 3.5 billion yuan (HK$4.4 billion) of debt has collapsed and its largest shareholder was detained, said government officials familiar with the matter.

Zhejiang Xingrun Real Estate doesn't have enough cash to repay creditors that include more than 15 banks, with China Construction Bank Corp holding more than 1 billion yuan of its debt, according to the officials, who asked not to be named.

The company's majority shareholder and his son, its legal representative, have been detained and face charges of illegal fundraising, the officials said.

The collapse of the company, based in the eastern town of Fenghua, adds to concern of strains in the nation's real estate sector and comes less than two weeks after the first bond default by a Chinese company. Shanghai Chaori Solar Energy Science & Technology's inability to repay its debt may become China's own "Bear Stearns moment", prompting investors to reassess credit risks as they did after the US securities firm was rescued in 2008, analysts said.

The city of Ningbo has jurisdiction over the town of Fenghua, which is the birthplace of former Chinese nationalist leader Chiang Kai-Shek. Fenghua is in discussions with the banks and Ningbo on how to repay the debt, the people said. They said Zhejiang Xingrun has assets worth 3 billion yuan.

A woman who answered the phone at the Fenghua government's news office who declined to give her name confirmed the company cannot pay its debt. A Beijing-based press officer at CCB said the bank asked for more information from its local branch about the report and hasn't heard back.