UBS chief economist Paul Donovan. Photo / Getty Images
UBS Group AG put global chief economist Paul Donovan on leave as it struggles to contain the fallout from his remarks on pork in China that sparked outrage in the country.
The Swiss bank is reviewing the matter and evaluating whether more steps need to be taken, a spokesman said by email. Shares of the world's biggest wealth manager fell for a second day as Donovan's comments continued to reverberate through China, a key market for its plans to attract more money from rich Asians.
A frequent commentator in financial media, Donovan had set off a furor during a discussion on Chinese consumer prices, which had risen because sick pigs had driven up pork costs.
The situation mattered, he said, "if you are a Chinese pig. It matters if you like eating pork in China." Social media commentators quickly condemned the first reference, interpreting it as a derogatory reference to local people rather than to ill swine.
Rival brokerages in Hong Kong stepped into the furor, urging the bank to fire all people involved in the incident.
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 get approval for a majority in a local securities venture under the country's recent financial opening push.
While most wealth managers still service China's rich from offshore centers like Hong Kong and Singapore, the country's massive pool of onshore money, estimated at around $20 trillion, is something of a holy grail for the industry.
The bank and Donovan were quick to apologize for the comment, saying it was "innocently intended." UBS, which has been hiring more senior executives at the joint venture, removed it from circulation.
"I made a mistake and I unwittingly used hugely culturally insensitive language," Donovan said in a Bloomberg TV interview with Francine Lacqua on Thursday, reiterating that his remarks were not intended to offend. "I apologize publicly for that."
Donovan on Friday declined to comment on his leave. The Financial Times reported on UBS's decision earlier.
Donovan is known for his analysis of central banks and economic indicators, and has researched the economics of diversity. In a 2018 report, he and colleagues concluded that "a prejudiced country or company cannot be economically great" and that "diversity means better decision making and better economic results." His Twitter page touts "economics without jargon, but with sarcasm."
The escalation comes at a time when tensions in China are already running high, with hundreds of thousands of protesters rallying in Hong Kong against an extradition law, while the U.S. is stepping up threats to increase tariffs.
Jack Ma, whose rise from English teacher to China's wealthiest man helped make rich capitalists acceptable in the communist country, predicted that tariffs may be just the beginning of a trade war that could last 20 years.
Local rivals of UBS, which have been trying to take bigger piece of a business dominated by the established Western wealth managers, were quick to condemn Donovan's comments. The Chinese Securities Association of Hong Kong, a group that represents financial institutions including the Hong Kong branches of mainland companies, demanded dismissals and a further apology.
Haitong International Securities Group Ltd. said Friday it had suspended its activities with UBS. The firm's Chief Executive Officer Lin Yong is also president of the Chinese Securities Association of Hong Kong. A spokeswoman didn't provide details on how much business her firm usually does with UBS.
The state-run Global Times tweeted "UBS chief global economist Paul Donovan used distasteful and racist language to analyze China's inflation in a recent UBS report."
UBS fell as much as 2.1% in Zurich trading, extending Thursday's 0.6% decline.
The trade tensions in particular have heightened sensitivities in China, with a number of Western companies being forced to make amends recently.
Last year, Dolce & Gabbana postponed a runway show in Shanghai after a series of videos featuring a Chinese model awkwardly attempting to eat cannoli, pizza, and other Italian foods with chopsticks caused outrage.
Messages by co-founder Stefano Gabbana insulting Chinese people and defending the video provoked a social media firestorm.
Mercedes apologized after quoting the Dalai Lama -- the Tibetan spiritual leader who's seen as a threat by Beijing -- in a China-focused Instagram post. Gap pulled a T-shirt featuring a map of China that left out territories claimed by Beijing.
"We apologize unreservedly for any misunderstanding caused by these innocently intended comments," UBS said in an emailed statement. "To be clear, this comment was about inflation and Chinese consumer prices rising, which was driven by higher prices for pork."