Bank of Canada (BoC) Governor Tiff Macklem said on Tuesday that global imbalances were widening and could threaten financial stability. Speaking to a business audience in Paris, Macklem noted that capital outflows from China continue and the United States remains the largest destination for these flows.

Key takeaways:

The imbalance is widening as capital continues to flow from China, with the United States being the largest recipient of capital.

Global imbalances are growing, which may also boost risks to financial stability.

While the imbalance is correcting slowly, the attractiveness of the US dollar may have allowed the imbalance to persist longer.

The leveraged trading strategies of hedge funds and non-bank financial intermediaries could make this underlying market more vulnerable.

Even as the United States withdraws from open trade, other countries should seek to deepen trade and investment relationships.

If we want a more sustainable and resilient global system, we need to create more places to save beyond just the United States.”