Chinese Premier Wants More Pork: How to Profit

Rising food prices continue to be a source of concern for the Chinese government, which fears that China may experience growing unrest as consumers are faced with rising prices. According to China's National Bureau of Statistics (NBS) the inflation rate for June came in at 6.4%, much higher than the government target of 4%. Food prices in particular are pushing Chinese inflation higher, with pork being one of the items whose price is rising the fastest. The price of pork, a staple of the Chinese diet, rose 11.4% in June up from the previous month and was up 57.1% from June of last year. The situation is serious enough that Chinese premier Wen Jiabao called on pig farmers to increase pork production in order to meet demand and drive down pork prices. The Chinese premier said that "to stabilize pork prices is the government's unavoidable responsibility". It's not certain what effect Wen Jiabao's call for increased pork production will have on pork prices because rising pork prices should be incentive enough to raise production levels. The Chinese government has made a number of moves over the past year to curb inflation, such as raising interest rates, increasing down payment requirements for real estate, introducing property taxes in order to cut into the profit of real estate speculators, raising the share of deposits that banks are required to hold in reserve and introducing a $200 billion plan to build and renovate 10 million low cost homes. However, the inflation rate continues to climb higher despite the government's best efforts. There are a number of trading options for investors, depending on how they feel that China's high inflation rate will affect the country's economy. The Global X China Consumer ETF CHIQ and the Guggenheim China Real Estate ETF TAO are two ETFs that could see their share prices climb higher with inflation. The iShares FTSE China 25 Index Fund FXI is worth taking a look at if you think that the Chinese economy will continue to grow at rates that far exceed Western economies' growth rates. China's inflation has been fueled by the country's booming economy, so the iShares FTSE China 25 Index Fund (FXI) share price could grow along with the Chinese economy. On the other hand, investors who feel that the Chinese government will be forced into taking further action in order to cool the economy and bring prices down may want to take a look at the ProShares Ultrashort FTSE China 25 FXP. If soaring inflation leads to the Chinese government resorting to stronger anti-inflationary measures, the ProShares Ultrashort FTSE China 25 (FXP) stands to gain from any significant drop in Chinese stock prices.