NEW YORK -- In 2012, China will matter. Period.
Four experts from vastly different fields offered their opinions on China's growing economic role here at The Economist's World in 2012 conference last weekend, and it was a stark reminder that the nation -- with 1.34 billion people and a gross domestic product of more than $11 trillion -- is too big for anyone to ignore.
James Mulvenon, director of the China Division of the Center for Intelligence Research & Analysis, warned in no uncertain terms that the Asian nation's growing strength will adversely affect cybersecurity.
Emerging economies will lock arms with developed nations over the issue of state-sovereign regulation of the Internet, he said. China has begun to view 'sovereignty' differently -- every router, switch, machine, cable and company can be governed by its laws.
"There is no non-sovereign space on the Internet" for China, Mulvenon said.
China is terrified of an Internet-fed revolution and is moving to tighten controls, he said. It is "nimbly and flexibly" responding to disruptive IT technology -- though microblogging services such as Twitter have been its biggest challenge.
"It's much less likely that we're going to see the kind of contagion [of political upheaval] in China that we saw before [in other nations]," he said.
Meanwhile, the Chinese will keep stealing personal, military and private sector information because they're so good at it.
"This is the most profound intelligence program they've ever had," he said, adding that he has been the victim of repeated cyber attacks.
A real escalation in economic espionage conducted by China on the U.S. occurred in mid-2009, Mulvenon said.
"When you go after .mil and .gov and classified defense contractors like me -- hey, all's fair in love and war," he said. "But when you start going after Google and other companies at the heart of the American innovation economy -- that's where the line was drawn."
Nicholas Lardy, senior fellow at the Peterson International Institute for Economics, said he believes 2012 will kick off the beginning of economic slowdown in China. Why? For one, real interest rates have been on average negative for last seven years, he said.
"Property has become the single most important driver of economic growth, but I don't think it's a sustainable source of economic growth," he said. As it slows, China will see a need to stimulate private consumption.
Alice Lyman Miller, senior fellow at Stanford University's Hoover Institution, said the expected political transition should not be underestimated. For the first time, there will be a Chinese communist party congress, she said, and 2012 is a presidential election year for both Taiwan and the U.S. -- both major policy partners.
"Sit back, buckle up, make sure your tray tables are in an upright position because we're in for a ride," she said.
On the issue of bottom-up political upheaval, Miller agreed with Mulvenon that digital uprisings are unlikely, but in cities, you can mobilize people very quickly, she said.
"It can get out of hand fast," she said. "I would not rule it out."
A chance of revolution is small, but in Asia, revolutionaries have historically been educated people.
"The last thing you want to do is have unemployed educated people," she said, noting those living in poverty on the edge of China's largest cities.
Carl Walter, COO of JP Morgan's China businesses and co-author of the book Red Capitalism, said that China's banks are on the fast-track to financial peril -- not because they're insolvent (though "a tremendous explosion of lending" isn't without its difficulties, he said) but rather because they're not willing to play by the rules of the global market.
"There's going to need to be a large recapitalization of banks in China in the next couple of years," even though this already happened recently, he said.
Walter and Lardy were in sharp disagreement over the legitimacy of the few numbers publicly offered by China's banks. Walter said they were not to be trusted; Lardy said he believed the figures were "of the highest quality."
Either way, what's under the hood may not instill confidence, Walater said, leading Chinese banks to change auditors to "manage transparency" -- or simply de-list from the Hong Kong stock exchange and list in Shanghai.
The Economist editor Tom Easton moderated the panel.
More coverage from The Economist's World in 2012:
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