CNPC Capital and Lakala Payment Drive Rally in Chinese Stocks Ahead of Yuan Fee Developments in the Strait of Hormuz

Yuan's Rise in Prominence Sparks Surge in Chinese Firms

Shares of Chinese companies involved in cross-border payments surged on Friday, 3 April, following reports that China's commerce ministry has observed the use of the yuan for toll payments through the Strait of Hormuz. The development is seen as a tangible application of the internationalisation of the yuan, a goal that China has been working towards for some time.

CNPC Capital Co., the financial arm of China National Petroleum Corp., hit the 10% upper circuit in Shenzhen. Other companies that saw significant gains include Lakala Payment Co., which rose as much as 7.9%, and Shenzhen Forms Syntron Information Co., which gained 9.4% before paring its gains.

According to a Bloomberg report, China's efforts to internationalise the yuan have led to its practical use in the Strait of Hormuz. The report noted that analysts believe this development strengthens the view that geopolitical tensions could drive more investment into China. A posting on the Ministry of Commerce's website cited a recent Lloyd's List report, which stated that ships are paying $2 million in fees to Iran to use this vital energy shipping route, and that these fees can be settled in yuan.

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Iran has been asserting its influence over shipping traffic in the Strait of Hormuz by imposing fees of approximately $1 per barrel, payable 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.

This development is expected to increase capital inflows into industries associated with oil and gas capital firms and electronic payment companies. Shen Meng, a director at the Beijing-based investment bank Chanson & Co, noted that China's efforts to internationalise the yuan have significantly increased the currency's use in Hormuz. The conflict in Iran has made the yuan a significant alternative for global investments due to China's strong ties with Iran.