Shares of Chinese firms that facilitate cross-border payments, such as CNPC Capital Co., Lakala Payment Co., and Shenzhen Forms Syntron Information Co., gained up to 10% on Friday, April 3, following reports suggesting that the commerce ministry observed the yuan being utilised for toll payments to transit through the Strait of Hormuz.
CNPC Capital Co., a financial services division of China National Petroleum Corp., surged by the maximum daily limit of 10% in Shenzhen. Lakala Payment Co., a prominent Chinese third-party payment provider, increased by as much as 7.9%, while the financial technology company Shenzhen Forms Syntron Information Co. rose by 9.4% before reducing its gains.
According to a report from Bloomberg, China has been working towards the internationalization of the yuan for some time now, and its practical use in the Strait of Hormuz illustrates a tangible application that markets have eagerly anticipated. The news article from Bloomberg mentioned that analysts believe this development strengthens the idea that geopolitical tensions could drive more investment towards China.
A posting on the Ministry of Commerce’s website, referencing a recent report by Lloyd’s List, indicated that ships are incurring $2 million fees to Iran to use this vital energy shipping route, and these fees can be settled in yuan, as reported by Bloomberg.
Iran has been asserting its influence over shipping traffic in the Strait of Hormuz, implementing fees that start at approximately $1 per barrel, to be paid in yuan or stablecoins, according to sources familiar with the matter who spoke to Bloomberg. A very large crude carrier (VLCC) generally has a capacity of around 2 million barrels.
Here’s what expert says
As the conflict in Iran persists, the yuan is becoming a significant alternative for global investments due to China’s strong ties with Iran, as noted by Shen Meng, a director at the Beijing-based investment bank Chanson & Co in comments to Bloomberg. Therefore, industries associated with oil and gas capital firms and electronic payment companies are expected to experience increased capital inflows, the investment banker mentioned to Bloomberg.
Shen also mentioned to Bloomberg that China’s efforts to internationalize the yuan have significantly contributed to increasing the currency’s utilization in Hormuz.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
