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Consumers In China About to Make Major Cutbacks?

It’s no secret that Beijing is concerned about inflation. Earlier in the week China’s central bank raised rates; the fourth rate hike since October.

And if new research from David Riedel of Riedel Research is any indication, the move will do little to assuage concerns among the people of China about inflation spiraling out of control.

In a live interview on CNBC’s Fast Money, Riedel reveals results of his proprietary data. He says, “we do a monthly survey of Chinese consumer confidence and its (results) are pretty scary.”

It shows, Chinese consumers expect 9% inflation over the next year. Those expectations are the highest since Riedel began the survey in 2007.

And even if actual inflation comes in lower, it may not matter. The perception is 9% and Riedel thinks the perception will have a wide ranging impact; "a direct impact on their sentiment, their spending and their outlook,” he says.

As a result he expects Chinese consumers to cut back, especially on big ticket items.

And if you're among those skeptics who don't think survey results such as these translate into behavior, Riedel begs to differ. "We see a .7 correlation between what we hear people are going to do and what they actually do."

Although he didn't say on TV, ahead of the broadcast Riedel recommended the following trades:

- Short the automakers; names such as China Automotive Systems and Wonder Automotive Technology Group could weaken.

- Play for softness in steel, and copper prices as consumers cutback.

On a related note, trader Tim Seymour suggests gaming China with consumer plays such as Shanda Games or Perfect World .






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Trader disclosure: On April 6, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Seymour owns (F); Seymour owns (GM); Seymour owns (MOS); Seymour owns (TM); Karabell owns (BHP); Karabell owns (GOOG), (RIMM), (MRVL);
Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (INTC); Adami owns (MSFT); Adami owns (NUC); Adami owns (BTU); Adami owns (BTU); Finerman and Finerman's Firm own (AAPL); Finerman and Finerman's Firm own (CVS); Finerman's firm is long GM leaps; Finerman and Finerman's firm own (MSFT); Finerman's firm owns (TGT); Finerman owns (USO); Finerman is short (IWM); Finerman is short (SPY); Finerman is short (MDY); Finerman's firm is long s&p 500 puts; Finerman's firm is long russell 2000 puts; Terranova owns (C); Terranova owns (JAM); Terranova owns (VRTS); Terranova owns (UPL); Terranova owns (PBR); Terranova owns (TCK); Terranova owns (BAX); Terranova owns (XOM); Terranova owns (AKAM); Terranova owns (CVI); Terranova owns (CNQ); Terranova is long (POT) puts; Terranova is long (NFLX) puts; Terranova is long (CAT) puts; Terranova is long (VLO) puts; Terranova is long (F) puts; Terranova is Chief Market Strategist of Virtus Investment Partners, LTD

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