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China Evergrande Group is by most measures the most indebted company on Earth, with around $305 billion in debt outstanding. (For perspective, Volkswagen AG (VWAGY) is a distant second, on the hook for roughly $192 billion.)

Global markets held their breath in September as Evergrande missed a bond interest payment and investors pondered "contagion." The company made an $83.5 million payment on Oct. 23 -- at the last possible minute of a 30-day grace period. Don't think for a second that Evergrande is out of the woods, though. It's not.

The giant property developer, once a Fortune Global 500 fixture, has $500 million in interest due by the end of the year, just more than 50 days from now, and it has no money to pay it off. Evergrande's back is up against the $60 trillion Chinese residential property "wall," and that wall is leaning.

If Evergrande defaults and is forced into bankruptcy, that wall is likely to collapse outright - and U.S. and global investors will be doing a lot more than "pondering" contagion. China could be looking at economic collapse, and stock markets will be hammered.

Let me walk you through what could happen - and the stocks I'd want to buy big in the event.

A Cautionary Tale in a Roaring Success Story

China's rapid rise from a Third-World country to the No. 2 economy on the planet is a success of monumental proportions. Chinese GDP per capita soared from $3,800 in 1999 to an estimated $10,500 in 2020, the World Bank reports. That means, within the space of a single generation, the standard of living almost doubled. But that impressive feat was dwarfed by whole-economy GDP growth.

Because in that same time span, China's GDP grew from $1.09 trillion to $14.72 trillion, a staggering 1,245% surge. By comparison, U.S. GDP in 1999 totaled $9.63 trillion and grew 117% to $20.94 trillion last year.

Two catalysts ignited China's astronomical growth: Exports and the country's soaring residential property sector. A testament to how rapidly the residential property sector has grown (and how fragile it is) can be found in a Goldman Sachs Investment Research valuation of that same sector. It is the largest asset class in the world at $60 trillion - the $48 trillion U.S. bond market is a distant second.

But the Chinese residential property sector was valued at $40 trillion just two years ago. The only way an asset class that big can grow that fast - 50% in two years - is through massive amounts of leverage.

That entire residential property sector - and not just the last $20 trillion worth, but the $40 trillion before that - is built on debt. And that debt is coming due.

Knock-Knock: It's the Debt Collector

Property developers borrow. They borrow from big banks and insurance companies. They borrow from brokerages and hedge funds. They even borrow from local governments. They borrow in the country's bond market and in offshore bond markets where they issue U.S. dollar-, Japanese yen-, and Australian dollar-denominated bonds.

They raise money by selling "wealth products" through banks and brokerages and through shadow-banking channels. And they take hundreds of billions of dollars' worth of deposits from prospective home buyers. Evergrande has even borrowed from its employees, lately, to make interest payments.

All that borrowing going into residential property means a huge swath of China's economy is leveraged to developers, construction companies, suppliers, homeowners, buyers, and, of course, real estate prices.

Harvard University economist Ken Rogoff estimates the residential property sector constitutes 29% of China's GPD, four percentage points higher than Goldman's estimates. Either way, it's huge.

Property accounts for 70% of Chinese households' assets, which means if housing prices start to fall, Chinese citizens are going to see their net worth impacted, lose confidence in their upward mobility, spend less, and maybe dump their homes into a crashing market.

Sales of new homes are already skidding as buyers step to the sidelines, afraid teetering developers won't be able to stand by new construction, won't finish homes, or will default one on top of another and throw the country into recession - or worse.

China Real Estate Information Corp. recently reported that sales at the country's top 100 real estate companies fell 36% in September from a year ago. And now home prices are slipping.

Evergrande's the biggest - but it's not the only developer in trouble. Other giant property developers are missing debt payments. Fantasia, another well-known large developer, missed a debt payment three weeks ago. Country-wide developer, Sinac, recently warned it would likely miss a payment, too.

Moody's Investors Service reported 12 real estate companies defaulted in the first half of the year. Fitch Ratings and Moody's have together downgraded 91 real estate development and related companies this year. That's the fastest pace of downgrades in five years, and it's three times the number of upgrades.

Last month, Bloomberg reported that, of $139 billion in U.S. dollar-denominated bonds trading at "distressed levels," 46% were bonds issued by the Chinese real estate related developers and financing companies. Property-related loans frighteningly make up one-third of all loans on the books at Chinese banks.

I Know Why the Caged Canary Sings

And so it is that all eyes are on Evergrande. As I said, there are other developers of all sizes struggling to service debt, but Evergrande, as big as it is, is deeply ingrained in the Chinese economy.

Evergrande has millions of homes sold, another 1.6 million waiting to be finished. It has projects across China's most important cities. Evergrande has a huge range of lenders and creditors, and retail investors and homebuyers (who've forked over billions in deposits) - it even has employees who've been strong-armed into lending Evergrande money.

That makes Evergrande the canary in the coal mine that is the Chinese residential property sector. If that bird chokes to death, overwhelmed by wafting interest payments, and the government doesn't bail it out and stave off bankruptcy, China's going to have its "Lehman Moment." And it won't be pretty.

Global equity markets will suffer almost instantaneous profit-taking, because at all-time highs, investors and traders don't want to lose what huge profits they're sitting on.

And because we're at highs - having been propelled there by sidelined money going to work - there won't be buyers waiting to dive into a murky pool. In such an environment, selling could send stocks down 15% to 25% in a matter of days or weeks as investors run for the exits.

They'd run in fear of a reprise of what happened to global markets when the U.S. subprime "Squid Game" killed the country's investment banks, rendered commercial banks technically insolvent, and flattened the economy. If that's the case, investors who act should find themselves much better off than those who merely react.

Here's What Investors Should Do

If a similar scenario plays out, you'll want to have stop-loss orders down before the canary croaks. And if we get a hard-and-fast correction, and you've gotten out, you'll want to jump onto the best of the best stocks that go on sale - and some more speculative stocks that could get hit brutally but would eventually rise and shine again.

My buy list, on any correction caused by a residential property meltdown in China, would include:

Microsoft Corp. (MSFT), of course, because it's my favorite company.

Apple Inc. (AAPL), which could get smacked 25% down to $110, on account of suppliers in China stumbling and sales of products and services, which are more than 17% of its revenue. Getting slashed by that much would make the iDevice-maker an absolute buy.

Micron Technology Inc. (MU), the data-storage king. This is a company already on sale, but it could crash if China tanks, because MU gets 57% of its revenue from that country. Buying MU at a 50% to 75% discount would be a home run. Even if it takes a few years to bounce back, it will bounce back.

And last but not least, the stock that would get hit the hardest if China rolls over is Wynn Resorts Ltd. (WYNN). Wynn gets more than 70% of its revenue - close to $4.7 billion - from Macau, the semi-autonomous epicenter of gambling in China.

Wynn wouldn't escape the Evergrande fallout. WYNN shares are also on sale now, down from more than $140 to $94. The stock could easily lose another 50% of its value and land in the neighborhood of $40 to $45 - it would be on my shopping list for sure.

When the canary stops singing, it'll be time to start shopping.