Bank of Canada governor Mark Carney says Canada is paying the price for China's intransigence in moving to a flexible currency exchange.

The central banker says the world's key economic powers need to co-operate in order to avoid future crises and to grow out of the current one.

Bank of Canada governor Mark Carney says Canada is paying the price for China's intransigence. (Sean Kilpatrick/Canadian Press)

If countries delay adjustment, he says, all countries suffer and growing strains could spur a disastrous spiral of protectionism both in trade and finance.

Carney says the immediate impact on China's hoarding of foreign exchange reserves is that other countries, including Canada, pay the price through an appreciating currency versus the U.S. dollar.

In Canada, he says, the loonie's rise will weigh down growth, estimating that the recent surge will wipe out all the positive developments from July in the long term.

The devaluation of the U.S. dollar has ignited talk of an alternative to the global reserve currency, but Carney says although that may come to pass, it will not alleviate the global imbalance problem. The solution, he says, is that all countries accept the responsibility that their domestic policies can damage other countries.