On the Shanghai stock market it’s time to play “Can you guess what the government will do next?”

As fans of this ever popular game know, the point is to guess what market roiling move Beijing plans next and then by buying or selling to get your portfolio positioned to profit from the change in policy.

This latest round has been set off by what investors in China now see as clear signs that the People’s Bank of China will raise interest rates again this month, perhaps as soon as this weekend.

The central bank raised its benchmark interest rates by 0.25 percentage points on October 20. That took the deposit interest rate that banks pay on deposits to 2.5% and the one-year lending rate to 5.56%. The increase was the first since December 2007.

But with inflation rising to 4.4% in October and expected to climb even higher in November, China’s investors are bracing themselves for more interest rate increases that would push prices for stocks and real estate lower. A survey of economists by Bloomberg shows the consensus forecast calling for inflation to climb to 4.7%.

The “clear signs” aren’t especially clear—unless you spend your days trying to read the policy tea leaves as traders in Shanghai do.

First sign: on December 3 the government announced that it would shift from a “moderately loose” monetary policy to a “prudent” monetary policy in 2011 to fight increasing inflation.

Second sign: On December 8 the government announced that it would release consumer price-index data on December 11, two days earlier than originally scheduled.

That last bit of news that has sent stocks in China down on December 8. The thinking is that moving up the inflation news means that the government plans to announce an interest rate increase very soon and wants to get inflation data out there to justify the move.

The Shanghai Composite Index fell almost 1% that day and Hong Kong’s Hang Seng Index dropped 1.4%. On December 9 the Shanghai index continued that fall by declining 1.3%. The Shanghai market is now down 11% from its November high.

Overseas investors who would like to play this game at home need to remember that frequently Chinese investors have bid stocks up or down in the days before the news is actually announced so much that the actual news doesn’t move stock prices. So to buy bargains, overseas investors need to buy before the news and not wait for the official announcement.

Assuming, of course, that the market is reading Beijing’s intentions correctly.