system
Given the following post, respond as if you're commenting on Reddit:
human
How is it possible for a single company's bankruptcy to bring down the whole economy?

I've been following the news surrounding Evergrande. Some analyst say that the company going down could have catastrophic outcomes across China and the rest of the world.  They've equated to Lehman brothers in 2008 (which I don't understand). 

How is it that the bankruptcy of a single company could have those far reaching effects across an economy as large as China, US or the world?
gpt
Usually the companies in question are major financial entities that lend money to other companies and hold others' investments. So if they collapse it triggers losses, and often a lack of access to cash, in other companies as well. Called a "liquidity crisis" because companies will lack cash flow to pay immediate Bill's due to the shock, and be forced to sell assets... which triggers economic contraction and expands the problem. 

However - In 2008, Lehman and Bear Stearns were the first to collapse, but they weren't the only ones. They were a symptom of a broader collapse in the US subprime mortgage market that caused a liquidity crunch in a large number of financial institutions - which  all sold the mortgages, insured them through another branch of the same company, and repackaged the mortgages into securities that they sold on the open market. (Plus, it was real estate values collapsing, which cut into consumer credit access because of home equity loans, triggered foreclosures, plummeted demand for new construction, etc.)

Evergrande - and even Lehman - weren't big enough to do that on their own. But often when one collapses, investors start panicking and looking around at other, similar companies- driving up borrowing costs, etc. or suddenly responding en masse to a problem that was bubbling under the surface for a long time.

To understand financial crises more, and 2008 in particular, I'd recommend looking into Robert Shiller's work on herd mentality/irrationality in investment, and maybe at some of Nouriel Roubini's work on how financial crises operate. You might also look at something like Paul Blustein's "The Chastening" for a more approachable journalistic treatment of the 1997-8 asian crisis that shared important similarities with 2008.