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Assessing China’s Geopolitical Risk

A high China Risk Index has the potential to disrupt $2.5 trillion in annual trade

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Market Snapshots

Event Breakdown

Assessing China’s Geopolitical Risk with the China Risk Index: This week, we introduce the China Risk Index, a dynamic tool leveraging weighted prediction market data to quantify geopolitical risk tied to China. Standing at 35.6% at the time of this writing, the index synthesizes insights from 14 markets across four categories: Military Conflict Risk, Diplomacy Risk, Technology Risk, and Policy Risk. These include "Will China invade Taiwan in 2025?" 13%, "China x Taiwan military clash by December 31st?" (13%), "Will Xi visit the US before July?" (7%), and "DeepSeek better than all OpenAI models before June?" (3%). The index weights these markets based on time horizon (near-term events prioritized), impact severity (e.g., invasion and military clashes weighted more heavily than policy markets), and market liquidity/volume.

The index’s current level of 35.6% signals a nuanced risk landscape. Military Conflict markets, such as "China x Taiwan military clash by December 31st?" (13%) and "China x Philippines military clash by December 31st?" (12%), reflect tensions in the South China Sea and Taiwan Strait, with probabilities suggesting trader concern about escalation. A spike here could indicate heightened military posturing, impacting global trade routes—over 40% of world shipping passes through these waters. 

Diplomacy markets like "Trump-Putin-Xi meeting before July?" (NO at 98.2%) and "Will Trump meet with Xi Jinping before July?" (NO at 85%) hint at stalled high-level talks, potentially exacerbating tensions. Please note, for these diplomacy markets we are focused on NO outcomes as they signal greater risk.

Technology and Policy risks, including "Trump bans China from buying US farmland?" (9%) and "House passes bill banning Chinese student visas before June?" (1%), underscore economic and cultural friction, with implications for U.S.-China investment flows.

Real-world implications are significant. A high index could foreshadow supply chain disruptions, as China’s role in manufacturing and rare earth metals is critical—any conflict might halt $2.5 trillion in annual trade. Military escalation odds (2%) with Taiwan for June, 13% for December could drive oil prices up, given China’s strategic energy imports. Diplomatically, low Xi to visit US odds before July (6%) suggest a diplomatic freeze, risking tariff wars or sanctions. Technologically, if DeepSeek outperforms OpenAI (3%), it might shift AI innovation eastward, influencing global tech leadership and investment.

The value of this weighted index lies in its ability to synthesize diverse signals into a single metric. Individual markets can be volatile or skewed by low liquidity, but by prioritizing near-term risks and high-impact events (e.g., invasions and military clashes), the index offers a broader depiction of the state of affairs. This approach empowers traders and analysts to anticipate shifts, whether toward diplomacy or conflict, providing a quantitative lens into tradable information.

As news unfolds—be it military drills, diplomatic statements, or tech breakthroughs—these markets will evolve, and the index will adjust in real-time. Track them on Polymarket for updates, and see how the China Risk Index positions you at the nexus of geopolitics and profit potential. This data-driven tool exemplifies "prediction market-driven news," turning complex dynamics into actionable insights for a world increasingly shaped by China’s actions.

Related markets & forecasts:

Long-Tail Radar

This week’s Long-tail Radar spotlights the "US announces withdrawal from WTO in 2025?" market on Polymarket, boasting $3,113 in volume—a modest figure for a long-tail event. Since its inception, the market has fluctuated, starting near 16% in mid-April, spiking to 30% around late April, and settling at 19% as of the time of this writing. This upward trend reflects growing trader intrigue, likely fueled by recent geopolitical shifts and policy debates in Washington.

The intrigue stems from escalating U.S.-China trade tensions and domestic calls for trade sovereignty. Recent news, including April 2025 Senate hearings on trade policy and a Trump administration proposal hinting at reevaluating multilateral commitments, has amplified speculation. A White House economic report last month flagged the WTO as outdated, citing unfair practices by China, sparking bipartisan murmurs of withdrawal. This market captures a niche yet impactful risk, offering traders a window into a potential seismic shift in global trade dynamics.

If the U.S. withdraws from the WTO in 2025, the implications would ripple worldwide. Economically, it could disrupt $24 trillion in annual global trade, with the U.S. losing access to WTO dispute mechanisms  impacting American exporters like agriculture and manufacturing. Domestic industries might gain short-term protection, but supply chain costs could rise, hitting consumers with higher prices. Geopolitically, it might weaken the rules-based trade order, emboldening nations like China to assert dominance in Asia-Pacific markets. The dollar’s reserve status could face pressure, while allies like Canada and Japan might seek new trade blocs, reshaping alliances.

The market’s $3,113 volume, though small, signals emerging attention, especially as news unfolds—whether through legislative drafts or international backlash. This long-tail event highlights a critical intersection of policy, profit, and global stability. Track it on Polymarket for real-time updates, as it offers a unique lens into how trade policy shifts translate into tradable information, fitting Adjacent’s mission to connect news to market movements.

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