Commentary on Political Economy

Friday 14 June 2019

UBS puts chief economist on leave as ‘pig’ row deepens

China brokerage cuts ties with Swiss bank over swine fever remarks UBS last year received approval to become the first foreign bank in China to take a controlling stake of its local securities joint venture © Reuters Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Share Save Save to myFT Topic Tracker Hudson Lockett and Daniel Shane in Hong Kong, Stephen Morris in London 3 HOURS AGO Print this page147 UBS has placed its chief economist on leave after a Chinese financial group suspended business with the Swiss bank because of his remarks about swine fever in China, which drew the ire of a nationalist tabloid and prompted calls by an industry group for his removal. On Friday, a spokesperson for Haitong International Securities said the company had cut ties between its Hong Kong unit and UBS across all business divisions based on “a collective decision made by the senior management”. 

Shortly after, a UBS spokesman told the Financial Times: “We confirm that we have asked Paul Donovan to take a leave of absence as we review this matter, to evaluate whether further steps need to be taken”. The sudden outpouring of vitriol for the Zurich-based bank comes amid tense trade negotiations between Washington and Beijing and heightened scrutiny of western companies operating in China. “Chinese consumer prices rose. This was mainly due to sick pigs,” Mr Donovan, an economist at UBS, said on Wednesday in comments about the impact of African swine fever in China. “Does this matter? It matters if you are a Chinese pig. It matters if you like eating pork in China. It does not really matter to the rest of the world.” UBS’s action shows executives are not taking any chances over the imbroglio, which could threaten the foothold it has recently established in China. Last year it received approval to become the first foreign bank in China to take a controlling stake of its local securities joint venture and it has been ranked as the top-performing foreign fund house for the past two years.

 The charge against Mr Donovan was led in part by Hao Hong, head of research at Bank of Communications International, the state-run Chinese bank’s Hong Kong unit. Mr Hong called the comments “distasteful and racist language” in a Twitter post. Mr Hong refused to explain what exactly about Mr Donovan’s comments was racist or offensive when reached by the Financial Times. Stephen Matthews, a linguistics professor at the University of Hong Kong, said: “The perceived insult is derived either from a misreading of the English text by a non-native speaker, or from a poor Chinese translation. Either way, the author is not at fault.” But Mr Hong’s interpretation was quickly picked up by the Global Times, a state-run Chinese tabloid, which said on Thursday in a Twitter post that the comments had “sparked an uproar across Chinese social media”. 

Although the bank and Mr Donovan issued apologies for the comments, which were also pulled from UBS’s website, the controversy continued to snowball. Recommended The Top Line Rachel Sanderson Dolce & Gabbana’s not so sweet reckoning in China The Chinese Securities Association of Hong Kong, which represents the brokerage arms of many Chinese banks in Hong Kong, rejected the bank’s response on Thursday and called on UBS to fire Mr Donovan. Lin Yong, chief executive of Haitong’s Hong Kong unit, is also head of the securities association. It is unclear how much regular business the brokerage arm had with UBS before cutting ties. Under its “Deals and Awards” page, parent company Haitong Securities provides only a single example of a business link: it served as financial adviser for UBS Global Asset Management’s acquisition this year of Portuguese heating supplier EnergyCo and its subsidiaries.

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