Recent economic developments in Asia have proved significantly worse than anticipated. Year-on-year GDP growth in China slowed to 6.8 per cent in the final quarter of 2008, the slowest rate of growth since 1991 and well below the government's target rate of growth of 8 per cent that is required to maintain a stable employment rate. It is difficult to establish the source of the Chinese slowdown with the available data. Fixed capital investment continued to expand rapidly, and the trade surplus in value terms rose to record high levels in the final quarter of the year. This suggests that consumption was weak, although retail sales figures indicate strong growth in the final quarter of the year. We have assumed that the slowdown observed in the fourth quarter was driven primarily by domestic demand. The collapse in global trade this year will have a significant impact on Chinese exports, given that nearly 50 per cent of Chinese goods exports are in the machinery and transport equipment sector. We expect GDP growth to average about 5½ per cent this year, with growth reverting above 8 per cent per annum only in 2012.