The impact of the international financial and economic turmoil on China’s economy has been manageable so far, but is expected to intensify. China’s financial system is relatively insulated from the direct impact of the international financial distress. In the real economy, overall export growth has until recently remained robust due to strong demand from emerging markets and gains in global market share reflecting strong competitiveness, although with pronounced differences in export performance between sectors. Looking forward, the impact of the crisis is spreading globally, with risk aversion and deleveraging leading to a funding squeeze that affects demand in many countries, including many emerging markets. Thus, as in earlier global downturns, China’s export growth is likely to be low in 2009, even with expected continued market share gains (we forecast 3.5 percent, based on current projections of global trends).