How to Profit from Chinese Premier's Call for Democracy

Chinese Premier Wen Jiabao said that China is in need of political reform during a speech at the World Economic Forum in the Chinese city of Dalian. Although Premier Wen has made numerous similar statements in the past, not all China observers are convinced of the Chinese Premier's sincerity. Their skepticism is supported by the fact that many of his comments regarding political reform go unreported in the Chinese press. Wen may simply be playing to an international audience that is growing increasingly concerned with China's status as a rising power. Some believe that Wen is also concerned about his legacy because he is scheduled to step down in just over a year and he might want to go down in history as one of China's great reformers. There's also the possibility that Wen is sincere in his outspokenness about the need for political reform but that his colleagues don't support his views. If this is the case, China's leaders could see the benefit of Wen speaking his mind to the Western and Chinese leaders, so long as it's not reported to the Chinese masses. One concern that is definitely shared by Premier Wen and his fellow Chinese politicians is the fear of civil unrest. As the Arab Spring saw the downfall of longtime autocratic leaders across North Africa and several other leaders in the Middle East facing calls to step down as well, Chinese officials feared that similar protests could erupt in China. While people in much of the Muslim world enjoyed greater political openness than they had ever known, Chinese authorities cracked down on any decent and let it be known that anyone promoting a Chinese version of the Arab Spring would face harsh punishment. Where Premier Wen may differ from the rest of the Chinese leadership is that he may see democracy as a way of avoiding the very unrest that his colleagues fear greater political openness would bring. His opinion obviously has merits because while tyrants always fear rebellions, they're quite rare in democracies. On the other hand, the Chinese political and economic system has served the country well and led to rapid economic growth. Investors who feel that the call for political reform by Chinese Premier Wen Jiabao will lead to greater economic opportunities for China and reduce the chance of widespread unrest may want to consider the iShares FTSE China 25 Index Fund FXI, Guggenheim China Small Cap Index HAO and the Global X China Consumer CHIQ ETFs. Most of China's rapid growth over the last 20 years has been due to political and economic reforms. Giving the people greater choice in how they lead their lives and who governs them could bring China even more growth. On the other hand, much of China's economy is centrally managed and Chinese companies often make investment decisions based on political and national interests, not just on an individual company's bottom line. This formula has served China well and now might not be the best time to tinker with it. China enjoys an economic growth rate that Western countries could only dream of. Political reforms in the midst of massive growth could have unintended consequences and hurt the Chinese economy. If Premier Wen's talk of political reform leads to civil unrest, the ProShares Ultrashort FTSE China 25 FXP and the Direxion Daily China Bear 3x Shares CZI ETFs could climb higher as Chinese economic growth stalls.