What if Beijing assumes trillions in local-government debt?
Beijing assuming LGFV debt is a backstop that removes tail risk — net risk-on for China-linked cyclicals (copper, EM FX, industrials) even as it confirms the underlying weakness; the stimulus impulse outweighs the credit headline. Rhymes with the 2015 local-government debt swap program, which stabilized the system and supported commodities. China is the marginal importer for industrial metals and oil; the forward twist is that mutualizing LGFV debt onto the sovereign balance sheet pressures CGB supply and the yuan over time — a slow drag rather than the acute Kaisa-style contagion the analogues imply.
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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 (electric blue) over time vs the market's (Polymarket, amber), 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. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Beijing nationally assumes trillions in local-government financing-vehicle debt to prevent cascading defaults. The trigger decomposes into signed root‑shocks — China growth ▼ · China stimulus ▲ · Credit spreads ▲ — which propagate through our causal graph to the markets below.