Sun, 21, was not hurt in the accident in which his luxury Porsche SUV was hit from the back by a bus on Sunday afternoon.
Chinese Olympic swimming champion Sun Yang will be detained for seven days after local police found him driving without licence following an accident.
Sun was also fined for an undisclosed sum, Hangzhou police said Monday, reports Xinhua.
Sun, 21, was not hurt in the accident in which his luxury Porsche SUV was hit from the back by a bus on Sunday afternoon.
"After looking into the system, we did not find any record of his licence. Sun admitted he did not have one," Hangzhou police said Monday.
Sun apologized for his behaviour.
"I should have been a role model as an athlete and a public figure but I failed my responsibility," said Sun.
"I am deeply sorry for what I have done and will reflect on my behaviour. Because I have been focusing on training and competition, I ignored learning some legal knowledge, which led to my mistake," he wrote on Weibo, the Chinese microblogging equivalent to Twitter.
It was not the first time Sun was in negative exposure. Sections of media even called his personal life "stained".
"Sun is the leading athlete in Chinese swimming but after the London Olympics, he was in the negative news from time to time," said an article titled "A summary of Sun Yang's stained personal life" on news portal China.com
It recalled Sun's conflict with his coach Zhu Zhigen and clashes with journalists.
"After a fallout with his coach, Sun was in the news again. Why was it him again? This might well be the first reaction when people read about him," commented Chinese portal Sohu on its sports page.
"A question mark is hanging over the public figures -- how should they behave themselves," it asked.
Sun rocketed to join basketball giant Yao Ming and tennis queen Li Na as Chinese sports icons after winning two gold medals at the 2012 London Games, but he went through a difficult year after the Olympics.
Sun has been struggling to balance his romance and career, which led to strained relationships with his long-time mentor Zhu Zhigen.
Despite gestures of reconciliation in March from both sides, Sun still asked Zhu to leave, with whom he had trained for 10 years, and worked with former Chinese head coach Zhang Yadong.
Sun won three titles in August's World Championships.
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