UBS chief economist 'on leave' over China comments

The Swiss investment bank is struggling to contain the fallout over his remarks on pork in China.

    The Asia region, China in particular, is a lucrative one for global investment banks {Feline Lim/Reuters]
    The Asia region, China in particular, is a lucrative one for global investment banks {Feline Lim/Reuters]

    Swiss investment bank UBS put its chief economist Paul Donovan on leave after his comments about pigs in China caused an outcry.

    His remarks have even prompted one Chinese firm to suspend all business with UBS, which is Switzerland's largest bank.

    UBS apologised on Thursday for any misunderstanding caused by Donovan's comments. The bank said his comments were about inflation and a rise in Chinese consumer prices due to higher pork prices.

    "We confirm that we have asked Paul to take a leave of absence as we review this matter, to evaluate whether further steps need to be taken," a UBS spokesman said on Friday.

    Donovan's comments, perceived by some as a racist slur, had further ramifications when Haitong International Securities, the Hong Kong unit of Chinese brokerage Haitong Securities Co, said it has suspended all collaboration with UBS.

    No other Chinese brokerages and financial institutions have cut ties with UBS, but some in the Chinese financial community have rejected the apology from UBS.

    "There is not a clear timetable on when to resume the collaboration, which is subject to the management's decision," Haitong International said in an email sent to Reuters.

    Donovan, who has been with UBS since 2016, said on Wednesday that consumer prices in China had risen mainly due to sickness among pigs.

    "Does this matter? It matters if you are a Chinese pig. It matters if you like eating pork in China," he said in his comments. Some interpreted the remarks as referring to people in China, not livestock.

    African swine fever, a disease deadly to pigs, is ravaging herds across Asia. China has reported more than 120 outbreaks since it was first detected in the country in August.

    Donovan did not respond to requests for comment.

    The Securities Association of China, a self-regulatory body for the industry, said that its members should not quote Donovan's research or invite him to events.

    The association also urged UBS to strengthen compliance and take measures to eliminate any negative impact from the remarks.

    Fully committed

    The stakes are high for foreign companies like UBS looking to expand their presence in China as the world's second-largest economy further opens up its financial sector.

    In December of 2018, UBS became the first foreign bank in China to get official approval to acquire a controlling stake in its local securities joint venture.

    The Swiss bank has said it was enhancing its "internal processes" to avoid any recurrence of such an incident and remains "fully committed to investing in China".

    Lin Yong, chief executive of Haitong International, announced the decision to freeze ties with UBS on his personal WeChat account, a Haitong employee told Reuters.

    It was also revealed in an email circulated among Haitong International staff, a second Haitong employee said.

    The Chinese Securities Association of Hong Kong (HKCSA), whose 124-member firms include offshore subsidiaries of Chinese brokerages and fund houses, said it was not aware if any other members were cutting ties with UBS.

    Haitong International's Lin is the president of the HKCSA, which demanded on Thursday that UBS dismiss Donovan and issue a formal apology from the board, while calling on companies and individuals to think carefully about doing business with UBS.

    "Regrettably, this information (UBS's apology) is not only insincere, but also arrogant, again hurting the feelings of Chinese people," it said in an open letter to the UBS board.

    Lin did not respond to requests for comment, while UBS declined to comment on Haitong International's decision and referred to Thursday's apology

    SOURCE: Reuters news agency