@newboi Yes, it's somewhat similar to the Japanese "chan", but is only used when addressing a young unmarried girl or own's daughter.
"Xiao" in front of the name would be closer to the Japanese "chan" and can be used for both boys and girls. And it's possible to use both "Xiao" and "er" at the same time. "er" is also more informal than "xiao".
If we go by the literal meanings, "xiao" translates as "small" and "er" translates as "child", but in this case "er" at the end is a short for "nu'er" - "daughter".