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QINGDAO TODAY
在线翻译:
szdaily -> Markets -> 
UBS loses bond deal role after economist’s pig comment
    2019-06-18  08:53    Shenzhen Daily

ONE of China’s biggest State-owned infrastructure companies has excluded UBS Group AG from a bond deal after the bank’s global chief economist sparked a furor with his use of the phrase “Chinese pig.”

China Railway Construction Corp. (CRCC) decided against hiring UBS as a joint global coordinator on a dollar bond sale, a CRCC spokesman said yesterday. The decision was prompted by last week’s pig remark, people familiar with the matter said earlier. UBS declined to comment.

CRCC is the first known corporate issuer to distance itself from UBS over a drama that has captivated financial professionals around the world and threatened to complicate the Swiss bank’s push into Asia’s largest economy.

While lost fees from the deal will have a negligible impact on the bank’s bottom line, the signaling effect from a major State-owned company is potentially more concerning as UBS tries to prevent the uproar from damaging its investment banking and wealth management businesses.

The stakes are high for UBS, which has had a presence in China longer than most Wall Street firms and was the first foreign business to win approval for a majority shareholding in a local securities venture after the country relaxed ownership rules.

Most wealth managers still serve China’s rich from offshore centers such as Hong Kong and Singapore, but the nation’s massive pool of onshore money, estimated at around US$20 trillion, is a huge prize for the industry.

UBS economist Paul Donovan made the “Chinese pig” comment Wednesday in an analysis of the country’s swine flu epidemic. He was attempting to explain why the outbreak shouldn’t concern investors eyeing the international inflation outlook.

“Does this matter? It matters if you are a Chinese pig,” the economist said. “It matters if you like eating pork in China. It does not really matter to the rest of the world. China does not export a lot of food. The only global relevance would be if Chinese inflation influenced politics and other policies.”

Donovan’s comment set off a firestorm on Chinese social media and was also condemned by trade groups representing Chinese brokerages.

Haitong International Securities Group, which competes against UBS for China-related business, said Friday that it had suspended its activities with the bank. CRCC opted for Citigroup Inc., HSBC Holdings Plc and ICBC International as joint global coordinators on its bond sale, people familiar with the matter said last week.

Donovan apologized, saying that he unwittingly used culturally insensitive language. UBS later placed the 47-year-old economist on leave and said it was evaluating whether more steps needed to be taken.

Many tried to explain it away by saying Chinese people are not native English speakers and have misunderstood, said Hong Hao, head of research at Bank of Communications International in Hong Kong and among the first in the Chinese financial community to call out Donovan for his comments.

“But you don’t need to be a native speaker to understand the derogatory connection between the word ‘pig’ and a culture,” Hong wrote in a post on his personal WeChat account.

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 last year, UBS became the first foreign bank in China to get approval to acquire a controlling stake in its local securities joint venture. (SD-Agencies)

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