Chinese media reports that the People's Bank of China (PBoC) will provide hefty liquidity injections for its five largest banks are being viewed by some analysts as the major stimulus move markets have been waiting for, but others say something even bigger is round the corner.
The PBoC will distribute 500 billion yuan ($81 billion) to its five largest banks through standing lending facilities - a tool that allows banks and commercial lenders to ask the central bank for one to three-month loans. The move has not been officially confirmed.
"If this is confirmed, it essentially means the PBoC is undertaking quantitative easing; it is printing money and giving capital to banks in the hope they will lend it on," said Evan Lucas, market strategist at IG.
The report saw copper futures spike 4 percent late Tuesday before retreating, a move so fast and powerful it triggered an automatic 10-second trading pause at the CME Group. Meanwhile, the Australian dollar - which is closely linked to China's economic performance - rallied 1 percent against the U.S. dollar.
Lucas noted the move was not as aggressive as easing measures undertaken in the second quarter. So far, the PBoC has cut the reserve ratio requirement (RRR) -the amount of deposits that banks need to hold at the central bank - for banks with a high proportion of lending to the agricultural sector and small firms.
"However, it is still a stimulus measure and one that has a broader reach, in that this is the first time the largest banks in China have seen a handout in 2014," said Lucas. "This is a rather large change intact considering the talk from Premier Li Keqiang in the last four to five weeks, who has been talking up reforms rather than stimulus."
Other analysts weren't as convinced.
"That lending facility seems to fluctuate quite a bit so I'm not sure if it's much of a change from their previous policy," said Alaistair Chan, China economist at Moody's Analytics. He views the injection as more of a short-term move to smooth fluctuations and wouldn't describe it as 'quantitative easing.'
"The most interesting thing is the fact that it was leaked to Sina.com which suggests the government is thinking about what they are going to do next, which I think will be a broader RRR cut sometime soon," Chan said.