How a joke on inflation in China could cost UBS millions of dollars

China is the last big market on earth where investors still have faith in active managers

UBS Group AG has managed to alienate an important client that it’s hoping to milk for millions in fees.

State-owned China Railway Construction Corp. has decided against hiring UBS as a joint global coordinator on a dollar-bond sale, Cathy Chan of Bloomberg News reported Monday. Haitong International Securities Group Ltd. has already cut business ties with the Swiss bank, while the Securities Association of China recommended members shun research by global chief economist Paul Donovan over language used in a research report last week.

At issue were Donovan’s comments on the rise of inflation in China:

“Does this matter? It matters if you