An apology letter from one of China’s largest shadow banks is giving a worrying sign that the country’s long-running real estate crisis could now spread to its financial system.

Zhongzhi Enterprise Group reportedly warned investors that it may be unable to pay its debts and calculated its total liabilities to be around 420 billion to 460 billion yuan ($59-65 billion). The Beijing-based financial institution has sizeable exposure to China’s real estate developers, and so its stumbles are reigniting fears of contagion from the country’s property sector troubles.

In its letter to investors, sent Wednesday, the firm revealed it had tangible assets worth around 200 billion yuan ($28 billion), reports Reuters. That would lead to a potential shortfall of up to $37 billion.

Zhongzhi did not immediately respond to a request for comment.

Zhongzhi Enterprise Group is a financial conglomerate in China’s shadow banking sector, which operates outside of the formal regulations that govern traditional banks. These financial institutions tend to work with wealthier households and corporate clients by offering loans and investing in real estate, commodities and bonds. Shadow banks offer higher returns than large state-backed banks that traditionally have low interest rates.

Signs of trouble at the shadow bank first emerged in August when affiliated companies missed payments on several high-yield investments. In its letter, Zhongzhi reportedly blamed the death of its founder Xie Zhikun in 2021 and the subsequent departure of senior executives for issues with the company’s internal management.

A potential default from Zhongzhi isn’t a surprise given its reported troubles in August, says Priyanka Kishore, the principal economist at the research firm Asia Decoded. Yet it’s important not to get “carried away by the hard landing narrative,” she says.

“With the government as a backstop, the risk of a systemic crisis remains low as long as such incidents are few and far between,” she explains. “The potential for more such defaults and insolvencies have likely influenced Beijing’s decision to provide stronger support to the real estate sector, including funding for some developers.”

China’s property sector accounts for about a third of the country’s GDP, and analysts warn that concerns about real estate are contributing to a consumer confidence crisis. For its part, Beijing is reportedly exploring new measures to revive the property sector like offering additional stimulus of at least $140 billion, and allowing banks to offer unsecured short-term funding for a developer’s day-to-day operations.

Even in the midst of a property crisis, Zhongzhi, through its affiliates, has offered loans to troubled developers and bought up assets from companies like the embattled property firm Evergrande, according to Bloomberg.

China’s property crisis started in late 2021 when China Evergrande Group, the world’s most indebted property developer, defaulted on its dollar debt obligations. Liquidity concerns then spread throughout the sector, sending other developers into default as well.

Creditors seized two of Evergrande chairman Hui Ka Yan’s Hong Kong properties, worth over $192 million, on Tuesday. The developer faces a winding-up hearing in Hong Kong on Dec. 4, which may put the company at risk of liquidation.

Another major developer, Country Garden, defaulted on its dollar debt for the first time in October. The company, one of the country’s largest developers by sales, was previously considered a role model by officials.

New home prices in 70 Chinese cities fell by 0.4% in October compared to the previous month, according to official data. It’s the steepest monthly decline in eight years.

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Original: Fortune | FORTUNE: China real estate crisis punches $37B hole in shadow bank balance sheet