What if China's banking system needs a sovereign-funded recapitalization?
A system-wide recognition of understated NPLs forces a sovereign-funded recapitalization of the banking sector (special bond issuance in the trillions of yuan), straining the fiscal position and crowding out credit.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. A system-wide recognition of understated NPLs forces a sovereign-funded recapitalization of the banking sector (special bond issuance in the trillions of yuan), straining the fiscal position and crowding out credit. The trigger decomposes into signed root‑shocks — China growth ▼ · Credit spreads ▲ · Dollar/reserve confidence ▼ · Financial conditions ▲ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | Gold XAUon Hyperliquid 📈 chart | Commodity | ▲ +0.8% hist +0.04–+0.94% · other way +0.29% (n=12) |
| 2 | High-yield credit HYG 📈 chart | Rate | ▼ -0.6% hist -0.89–-0.01% · other way -0.24% (n=12) |
| 3 | Freeport (copper) FCX 📈 chart | Equity | ▼ -0.6% hist -2.17–+0.56% · other way -0.01% (n=12) |
| 4 | Copper XCUon Hyperliquid 📈 chart | Commodity | ▼ -0.5% hist -1.77–+0.41% · other way +1.57% (n=12) |
| 5 | China internet KWEBon Hyperliquid 📈 chart | Equity | ▼ -0.5% hist -0.58–-0.02% · other way -0.26% (n=11) |
| 6 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.4% hist -0.29–+0.25% · other way -0.09% (n=12) |
| 7 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▲ +0.4% hist -0.69–+1.94% · other way +25.2% (n=12) |
| 8 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +0.4% hist -0.2–+0.27% · other way -3.79% (n=12) |
| 9 | Financials XLF 📈 chart | Equity | ▼ -0.4% hist -0.87–+0.1% · other way -0.19% (n=12) |
| 10 | Alibaba BABAon Hyperliquid 📈 chart | Equity | ▼ -0.4% hist -1.4–+2.32% · other way -3.17% (n=11) |
| 11 | US dollar (DXY) DXYon Hyperliquid 📈 chart | FX | ▼ -0.4% hist -0.26–+0.27% · other way +1.08% (n=12) |
| 12 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -0.4% hist -1.05–+0.22% · other way +0.28% (n=12) |
| 13 | JPMorgan JPM 📈 chart | Equity | ▼ -0.3% hist -1.2–+0.24% · other way +1.7% (n=12) |
| 14 | EUR/USD EURUSDon Hyperliquid 📈 chart | FX | ▲ +0.4% hist -0.56–+0.39% · other way -1.14% (n=12) |
Probable recommendation
Historical precedent — what analogous events actually did
Across 40 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| SOL SOL | SHORT | -16.2% · 5d -16.3% | 82% | 16 | 0.46 | ✓ matches cascade |
| KRW KRW | SHORT | -1.1% · 5d +0.0% ↺ fades | 68% | 37 | 0.34 | ⚠ differs |
| High-yield credit HYG | SHORT | -0.6% · 5d -0.1% | 67% | 36 | 0.27 | ✓ matches cascade |
| SMH SMH | LONG | +1.1% · 5d -0.7% ↺ fades | 65% | 38 | 0.26 | ⚠ differs |
| XLF XLF | SHORT | -0.6% · 5d -1.4% | 62% | 38 | 0.22 | ✓ matches cascade |
| US dollar DXY | LONG | +0.4% · 5d -0.1% ↺ fades | 62% | 40 | 0.21 | ⚠ differs |
| JPM JPM | SHORT | -0.9% · 5d -1.9% | 62% | 40 | 0.21 | ✓ matches cascade |
| SPX SPX | LONG | +0.4% · 5d +0.2% | 60% | 40 | 0.17 | ⚠ differs |
| Volatility VIX | SHORT | -0.3% · 5d +1.9% ↺ fades | 59% | 39 | 0.17 | ⚠ differs |
| EURUSD EURUSD | SHORT | -0.7% · 5d -0.1% | 59% | 37 | 0.15 | ⚠ differs |
| XCU XCU | SHORT | -1.4% · 5d -1.3% | 58% | 38 | 0.14 | ✓ matches cascade |
| FCX FCX | SHORT | -1.7% · 5d -1.6% | 56% | 39 | 0.10 | ✓ matches cascade |
| NDX NDX | SHORT | -0.8% · 5d -1.6% | 56% | 40 | 0.10 | ✓ matches cascade |
| Bitcoin BTC | SHORT | -4.3% · 5d -3.7% | 56% | 22 | 0.09 | ⚠ differs |