By Jason Xue and Clare Jim

SHANGHAI/HONG KONG (Reuters) -A major Chinese asset manager has told its investors it needs to restructure its debt, stoking fears that a chain of defaults could spread through the financial sector and deliver a destabilising shock to the country's weakened economy.

Zhongzhi Enterprise Group, which raises money from companies and the wider public and is reported to manage 1 trillion yuan ($137 billion) in assets, spoke of the restructuring in an investor meeting on Wednesday, a video seen by Reuters showed.

The Beijing-based firm, which has sizeable exposure to the country's cash-squeezed real estate sector, has already stopped payment to investors in all investment products.

Zhongzhi operates in China's $3 trillion shadow finance sector, selling high-yielding investment products via its trust and wealth management units, and has strong links with banks and other financial institutions.

Anxious retail investors are bombarding listed companies with questions about their exposure to Zhongrong, a subsidiary of Zhongzhi, after missed payments by the trust company triggered fears of wider contagion.

Citigroup said in a note that it expected more trust-fund defaults due to their exposure to the property sector downturn in China, but this was unlikely to lead to a "Lehman moment".

"As the problems in the property development sector are not new and have already been unfolding for several years, we think investors would have already psychologically prepared for the potential of defaults."

Zhongzhi's financial trouble is the latest challenge forChinese authorities as they battle to contain a worseningproperty sector crisis and revive a faltering recovery in the world's second-largest economy.

Morgan Stanley has become the latest among some of the major brokerages to cut China's growth forecast for this year. It now sees China's gross domestic product (GDP) growing 4.7% this year, down from an earlier forecast of 5%.

Zhongzhi has hired one of the Big Four accounting firms toconduct a comprehensive audit of the company, and is seekingstrategic investors, its management told investors inWednesday's meeting. The plan is for "self-rescue" through restructuring, with afocus on debt collection and asset liquidation, but bankruptcyis also an option, they added, without disclosing the amount ofdebt that needed to be restructured. It was not possible to determine whether the company isinsolvent before the completion of auditing work, which began inJuly, the executives told its investors, according to the videoseen by Reuters. Zhongzhi did not immediately respond to a request for comment. The Wednesday's meeting was held after Zhongrong International Trust Co, a leading trust company controlled by Zhongzhi, missed payments on dozens of investment products since the end of July, Reuters reported on Wednesday, citing sources.