What if cash-strapped Chinese provinces start delaying civil-servant pay?
Provincial wage arrears are a fiscal-credibility tell, not a Lehman event: the clean trade is short the China-beta complex (copper, KWEB/Alibaba, AUD) as local-government financing vehicles signal stress, with miners like Freeport leading metal lower. Rhymes with the 2021 Kaisa/Evergrande LGFV scare — copper and AUD bled but global contagion stayed contained because the channel is domestic demand, not dollar funding. Forward angle: unlike 2021, Beijing's reluctance to backstop provinces directly is the new fat tail.
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 6–18 months 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. Cash-strapped Chinese provinces delay teacher and police salaries, sparking scattered protests and a fiscal-credibility shock. The trigger decomposes into signed root‑shocks — China growth ▼ · Credit spreads ▲ — 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 | Freeport (copper) FCX 📈 chart | Equity | ▼ -0.7% hist -2.75–+0.65% · other way -0.01% (n=12) |
| 2 | Copper XCUon Hyperliquid 📈 chart | Commodity | ▼ -0.6% hist -1.93–+0.39% · other way +1.57% (n=12) |
| 3 | China internet KWEBon Hyperliquid 📈 chart | Equity | ▼ -0.5% hist -0.43–+0.21% · other way -0.26% (n=11) |
| 4 | Alibaba BABAon Hyperliquid 📈 chart | Equity | ▼ -0.5% hist -1.5–+2.31% · other way -3.17% (n=11) |
| 5 | High-yield credit HYG 📈 chart | Rate | ▼ -0.4% hist -0.69–+0.03% · other way -0.24% (n=12) |
| 6 | Aussie dollar AUD 📈 chart | FX | ▼ -0.4% hist -0.66–+0.07% · other way -1.69% (n=12) |
| 7 | Chinese yuan CNY 📈 chart | FX | ▼ -0.3% hist -0.38–-0.02% · other way -0.59% (n=12) |
| 8 | Financials XLF 📈 chart | Equity | ▼ -0.3% hist -0.74–+0.12% · other way -0.19% (n=12) |
| 9 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -0.3% hist -0.88–+1.36% · other way +25.2% (n=12) |
| 10 | JPMorgan JPM 📈 chart | Equity | ▼ -0.2% hist -0.81–+0.17% · other way +1.7% (n=12) |
| 11 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +0.2% hist -0.26–+0.79% · other way -3.79% (n=12) |
| 12 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.1% hist -0.23–+0.46% · other way -0.09% (n=12) |
| 13 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -0.1% hist -5.13–+1.88% · other way +5.1% (n=11) |
| 14 | Semiconductors SMHon Hyperliquid 📈 chart | Equity | ▼ -0.2% hist -0.39–+1.35% · other way +2.93% (n=12) |
Probable recommendation
Why we may diverge from history
Trust the cascade short on MSTR; the +19% history is BTC-regime contamination — Signature/Evergrande/tariff windows all coincided with the 2023-25 bull, a driver orthogonal to China provincial pay arrears.
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 |
|---|---|---|---|---|---|---|
| SMH SMH | LONG | +1.2% · 5d -0.6% ↺ fades | 67% | 37 | 0.28 | ⚠ differs |
| High-yield credit HYG | SHORT | -0.5% · 5d -0.0% | 66% | 35 | 0.25 | ✓ matches cascade |
| US dollar DXY | LONG | +0.5% · 5d -0.2% ↺ fades | 62% | 40 | 0.21 | · |
| XLF XLF | SHORT | -0.6% · 5d -1.3% | 61% | 37 | 0.20 | ✓ matches cascade |
| SPX SPX | LONG | +0.5% · 5d +0.3% | 60% | 40 | 0.18 | ⚠ differs |
| XCU XCU | SHORT | -1.5% · 5d -1.6% | 60% | 37 | 0.17 | ✓ matches cascade |
| JPM JPM | SHORT | -0.6% · 5d -1.7% | 60% | 40 | 0.17 | ✓ matches cascade |
| FCX FCX | SHORT | -2.2% · 5d -2.1% | 58% | 39 | 0.15 | ✓ matches cascade |
| Bitcoin BTC | SHORT | -4.7% · 5d -4.0% | 58% | 21 | 0.13 | ✓ matches cascade |
| KWEB KWEB | LONG | +0.4% · 5d -1.5% ↺ fades | 55% | 23 | 0.10 | ⚠ differs |
| AUD AUD | SHORT | -0.4% · 5d -0.0% | 55% | 36 | 0.09 | ✓ matches cascade |
| Gold XAU | LONG | +0.4% · 5d +0.3% | 53% | 37 | 0.06 | · |
| BABA BABA | LONG | +2.6% · 5d -2.4% ↺ fades | 49% | 21 | 0.00 | ⚠ differs |
| CNY CNY | SHORT | -0.2% · 5d -0.1% | 47% | 36 | 0.00 | ✓ matches cascade |
Why this probability
Provincial fiscal stress real and ongoing in China; scattered arrears plausible over 18m, system-wide unlikely. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.