If China crash, Canada will suffer

An ocean away, in a place where Canadian fortunes increasingly hinge, greater opportunities come with greater risks. The possible crash of China has posed a potential threat to Canadian well-being. The Chinese economy has direct impacts on the reconfiguring state of Canadian economy. It is not only Canada is a commodity exporter; the demand growth in China has affected prices worldwide.

For quarters, terms of trade gain is up, Canada is richer as a result.

The threat of Chinese economy is both cyclical and structural. It might be an over shooting in the tightening of monetary policy and investment losses.

Businessmen in China all know how important connection is, everyone talks about it and brags about it. It is the same everywhere in the world. Connection is not inviolable; it could become a liability if you are linked to the losing side in a power struggle. This year is the year many of the Chinese leadership roles would change. State controlled firms might lose their preferential treatment through policy adjustment.

Constructively engaging China is a great idea, to put it into practice it would become a much tricky game.

Supply and demand3

A coordination game is one in which two or more parties are faced with an identical set of choices. The outcome of the game can vary depending on what each party decides to do, with some outcomes being beneficial to all parties, others to just one party, and still others to neither party. Think when four cars pull up at the exact same moment to an intersection with a four way stop sign.

Coordination failure can happen when people make decisions based on assumptions about how other people will behave. When all four cars go at once. A viable long term solution can be found when the information sharing is clear and authentic.