Copying and distributing are prohibited without permission of the publisher.


China market round-up: protestors take to Hong Kong streets, UBS apologises for economist’s language, May exports rebound as imports drop

Hong Kong island adobe stock 230x150
By Rebecca Feng
14 Jun 2019

In this round-up, US president Donald Trump warned of higher tariffs should his Chinese counterpart not meet him at G20, UBS’s chief economist employed questionable language when discussing the rise of Chinese consumer prices, and total exports edged up in May while exports to the US fell again.

At a press conference in the White House garden, US president Donald Trump said he expected to meet Chinese president Xi Jinping at this month’s G20 summit in Osaka.

“It’s me right now that's holding up the deal,” Trump told reporters. “We had a deal with China and unless they go back to that deal I have no interest.”

Trump also warned that tariffs would go up if Xi would not meet him at the G20 summit.

In response, Gao Feng, a spokesperson of the Chinese Ministry of Commerce, said on Wednesday that China will “stay until the end” if the US insists on escalating trade tensions.

Meanwhile, more than a million people in Hong Kong took to the streets to protest against a bill that would allow for the extradition of Hong Kong defendants to mainland China to face trial. Although “political offences” would not be eligible for extradition and any extradition requests would still need to be approved by Hong Kong courts first, the protesters fear that the bill will undermine Hong Kong’s independent judiciary.

News of the protest was largely absent from Chinese domestic media. The dominating narrative onshore instead is that the protesters are victims of foreign interference.

On the other end, the US State Department expressed “grave concern” over the situation.

“We are also concerned that the amendments could damage Hong Kong’s business environment and subject our citizens residing in or visiting Hong Kong to China’s capricious judicial system,” according to a Monday statement. “Continued erosion of the ‘one country, two systems’ framework puts at risk Hong Kong’s long-established special status in international affairs.”

The stand-off between the protesters and the police has raised fears among analysts that Hong Kong would lose its appeal to foreign businesses.  

“Beijing’s push for this extradition bill could prove costly as investors and businesses value Hong Kong’s autonomy,” Edward Moya, a senior market analyst at Oanda, wrote in a Thursday note. “Uncertainty with Hong Kong’s autonomy will dampen business prospects and put a further strain on Chinese growth.”

The Hong Kong legislative council is closed for Thursday and Friday.


Paul Donovan, the global chief economist at UBS, said in a Wednesday podcast that higher consumer prices due to sickness among pigs would matter to “a Chinese pig”.

"Does it matter? It matters if you are a Chinese pig,” he said. “It matters if you like eating pork in China.” The transcript was posted on UBS's official website and was later taken down.

Chinese state-owned media Global Times posted on its Twitter on Thursday: “UBS chief global economist Paul Donovan used distasteful and racist language to analyze China’s inflation in a recent UBS report, sparking uproar across Chinese social media. Chinese netizens called for an official apology from #UBS.”

UBS apologised in a statement emailed to Reuters and Donovan also apologised on Bloomberg TV.

However, the Chinese Securities Association of Hong Kong condemned the apology as not sincere enough and submitted an open letter to UBS demanding it to fire Donovan.


China's CPI inflation accelerated by 2.7% year-on-year in May after increasing 2.5% year-on-year in April.

“We do not think this will be a big constraint for monetary policy, as monetary policy has tended to react to core inflation, which should remain mild,” Zhennan Li, China economist at Goldman Sachs, wrote in a Wednesday research note.


Chinese exports growth rebounded to 1.1% in May. However, imports resumed its contraction of 8.5% year-on-year. As a result, China’s trade surplus rose to $41.7bn in May from $13.8bn in April, according to data released by the General Administration of Customs on Monday.

China’s exports to the US fell again but moderated to a 4.2% contraction year-on-year. Imports from the US dropped 26.8% year-on-year. However, exports to the European Union saw gains for the third month, growing 6.1% year-on-year.


Total assets of Chinese financial institutions reached Rmb302.7tr ($43.7tr) by the end of the first quarter, an 8% increase year-on-year,  the People’s Bank of China said on Monday.

Total assets in the banking industry reached Rmb275.8tr, or 91.1% of total assets, a 7.7% climb year-on-year.


Growth of aggregate financing accelerated to 10.6% year-on-year in May. Growth of outstanding renminbi loans eased slightly to 13.4% from 13.5% in April, according to central bank data on Wednesday. New renminbi loans in May reached Rmb1.18tr.

In the bond market, outstanding corporate bonds reached Rmb21.16tr, a 10.9% increase. Outstanding local government special-purpose bonds climbed to Rmb8.1tr, a 41.1% jump year-on-year.

“Liquidity conditions within the financial system in May were generally tight, partially because of the Baoshang Commercial Bank takeover in late May which affected risk appetite among market participants,” Yu Song, China economist at Beijing Gao Hua Securities Company, wrote in a Thursday note. “This constrained the amount of total social financing.”

He expected further TSF growth in June due to the government’s loosening policies.

By Rebecca Feng
14 Jun 2019