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. "We think the default of the developer will alert the banks on escalating risk from developers amid the liquidity tightening," said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research. "We maintain our view that banks may revisit loan policy on property and may take a stricter stance on property development loans, particularly for small developers." The property market in smaller mainland cities faces "true risks of a sharp correction" due to oversupply and investors may have underestimated the risk, Nomura Holdings economists said in a March 14 report. Property shares slid to a 16-month low in February after Industrial Bank Co suspended mezzanine financing for developers, adding to concerns that smaller developers may default on their borrowings amid the government's property curbs and an economic slowdown. New home prices in Ningbo rose 7.1 per cent in January from a year earlier, according to the National Bureau of Statistics. The city in February recorded the 10th lowest yield on residential investments in the past year among 116 Chinese cities, with negative 1.1 per cent.