China Secures 5% Growth, Considers 'Interest Rate Card' Ahead of Trump's Inauguration

China successfully maintained a 5% growth rate last year, providing a sigh of relief for investors. Despite the worst start in over eight years due to U.S. pressure, the Chinese stock market rebounded thanks to the solid economic growth rate. 

On the 17th, the Shanghai Composite Index closed at 3,241.82, up 0.18% from the previous trading day. It marked a two-day consecutive rise following a 0.28% increase the day before. Over the past week, the Shanghai Composite Index rose by 2.31%. The CSI300 Index, composed of large-cap stocks from the Shanghai and Shenzhen stock exchanges, also jumped 2.14% over the past week.

The Chinese stock market, which had been plummeting ahead of U.S. President-elect Donald Trump's inauguration, turned upward thanks to China's economic growth rate last year, which far exceeded market expectations. The National Bureau of Statistics of China announced that last year's GDP increased by 5% compared to the previous year. This not only met the Chinese government's target but also surpassed experts' expectations of 4.9%.

Thanks to the economic stimulus measures that began in earnest in the second half of last year, liquidity was secured, and the focus on pushing exports to avoid 'tariff bombs' ahead of Trump's inauguration helped prevent a slowdown in growth. Although there are still voices of concern about a sharp slowdown in the Chinese economy after the inauguration of Trump's second administration, investors are relieved by last year's solid performance confirmed by statistics.

However, with expectations of intensified trade pressure after Trump's inauguration, the Chinese authorities are also busy. Market attention is focused on the People's Bank of China's announcement of the Loan Prime Rate (LPR) for January, scheduled for the 20th.

The People's Bank of China has kept the LPR, which serves as the benchmark for general and mortgage loans, unchanged for two consecutive months until last month. Some suggest that the People's Bank of China, having hinted at an accommodative monetary policy this year, might lower the LPR before the Lunar New Year holiday to ensure sufficient market liquidity. However, with the continued strength of the U.S. dollar, there is a prevailing view that they will be cautious about further rate cuts. 

Beijing correspondent Kim Eun-jung kej@hankyung.com