A Chinese real estate developer with more than half a billion dollars in debt has collapsed and its largest shareholder detained in what could be a further sign of financial stress in the world's second largest economy.

The Zhejiang Xingrun Real Estate Co, which is based in wealthier eastern China, did not have sufficient cash to repay 3.5 billion yuan ($625 million) of debt to creditors, including more than 15 banks, Chinese officials reportedly told local and international media.

Hanging on: Zhejiang Xingrun's collapse paints a gloomy picture for the Chinese economy. Credit:Bloomberg

The collapse of the company, based in the eastern town of Fenghua, has put investors on edge as it 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.

Analysts have warned Shanghai Chaori Solar Energy Science & Technology Co's inability to repay its debt last week may become China's own ''Bear Stearns moment'', prompting investors to reassess credit risks as they did after the US investment bank firm was rescued in 2008.