CURRENCY

YUAN WON’T BE FULLY CONVERTIBLE FOR AT LEAST FIVE YEARS

China won’t make its currency fully convertible for at least five years because it worries hedge funds may force the yuan to plunge, much as happened to the Korean won and Thai baht during the 1997 Asian financial crisis, a member of the central bank’s monetary committee, Li Deshui, said.

“There’s more than $800 billion to $1 trillion of hedge funds in the world and the Chinese financial system is relatively weak,” Mr. Li said in an interview. “If the [yuan] becomes fully convertible it would be attacked by these hedge funds.”

China last week ended its currency’s decade-old peg to the dollar, allowing the yuan, also known as the renminbi, to strengthen 2.1% from its previously fixed rate of about 8.3, marking the first step toward a more flexible exchange rate regime. America, European Union, and Japan have pressed China to de-peg the yuan and allow it to strengthen to curb what they say is an unfair advantage for Chinese exporters.

Mr. Li, who is also commissioner of China’s National Bureau of Statistics, said the state of the country’s banks is a key reason why the government won’t allow the yuan, also known as the renminbi, to become a fully tradable currency anytime soon. “Over the next five years, I do not foresee the renminbi becoming fully convertible,” Mr. Li said in Beijing on July 22. “Our banks are not good enough and the monetary system is not quite up to international standards.”

– Bloomberg News

ENERGY

MAJOR SHAREHOLDER URGES UNOCAL TO RECONSIDER CHEVRON BID

LOS ANGELES – A major shareholder of Unocal Corporation has urged the company’s board to reconsider its endorsement of a takeover bid by Chevron over a higher offer by a Chinese state-owned oil company, saying the board may be breaking the law if it enters into a deal that forbids it from obtaining higher offers. In a July 20 letter to Unocal’s board, P. Schoenfeld Asset Management LLC, which holds more than 1 million shares of oil and gas producer Unocal, wrote that the oil company has a responsibility to its shareholders to lobby the federal government for approval of Chinese oil company Cnooc Limited’s bid. “It is a violation of bedrock Delaware law for fiduciaries to enter into agreements that bar them from obtaining materially higher offers,” according to a letter by the New York firm that was released yesterday. “It is your duty to maximize value for stockholders.”

– Associated Press

WALL STREET

NYSE CHIEF CONSIDERED BUYING PHILADELPHIA EXCHANGE

New York Stock Exchange Chief Executive John Thain has considered as recently as April buying the Philadelphia Stock Exchange.

However, it’s not known whether merger talks had occurred or are ongoing.

According to documents related to the NYSE-Archipelago Holdings Incorporated merger released Thursday, notes by Mr. Thain, dated April 7, to the NYSE Board of Directors outlined the strategic rationale for the Archipelago merger, including expansion in the options business with a “potential acquisition of Philadelphia,” referring to the Philadelphia Stock Exchange.

The NYSE would not comment on Friday. Philadelphia Stock Exchange Chairman and CEO Meyer Frucher also declined to comment.

Mr. Thain’s notes cited the “growth engine for new product expansion” as the second reason for why the deal with Archipelago makes strategic sense. It’s unclear from the notes whether the exchange considered buying all or part of the Philadelphia market, which also trades stocks. The Philadelphia Stock Exchange, which is the nation’s fourth biggest options market, has been struggling against its larger competitors.

Archipelago is changing the terms of another deal it has pending, to acquire the parent of the Pacific Exchange. It now will be an all-cash deal. The original pact was to be about 80% cash and 20% in Archipelago shares. “Because an all-cash deal will no longer require Archipelago to prepare and file a registration statement with the Securities and Exchange Commission … Archipelago and PCX Holdings believe that this change should accelerate the time to closing of the merger,” Archipelago said in a statement.

– Dow Jones Newswires