The risk is that the collapse of Evergrande, a Chinese real estate company with a staggering US$300 billion of debt outstanding, could set off a chain reaction that spreads overseas.
"Some fear an Evergrande meltdown will have systemic risks on par with the impact Lehman Brothers' demise had on the US stock market," Ed Yardeni, president of Yardeni Research, wrote in a note to clients Thursday.
Like Lehman in its heyday, Evergrande is massive, suggesting a default would be felt widely.
The company has 200,000 employees, raked in more than $110 billion in sales last year and has more than 1,300 developments, according to Reuters.
Wall Street is keeping close tabs on the Evergrande situation, which highlights the extraordinary amount of borrowing Chinese companies and families have taken on over the years.
Yet there are no signs that investors think an Evergrande default will infect US markets or the domestic economy.
No contagion, at least so far:
For now, investors seem confident that authorities in Beijing would use their vast control over the Chinese economy to limit the damage. And there is no evidence, at least so far, of contagion in US markets.
"I don't think the Evergrande meltdown, and the financial problems of Chinese property companies more broadly, will reverberate back on the US economy or markets," Mark Zandi, chief economist at Moody's Analytics said.