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UCLA Pacific Basin Law Journal

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Legalizing China's Economic Coercion Toolkit


China is in the late stages of developing a Central Bank Digital Currency (CBDC), which is essentially a digital, sovereign currency lacking convertibility to physical cash. This initiative is a significant innovation in currency systems, not yet implemented by any other country. China will face unique challenges in its CBDC project. As a first mover in this space, Chinese leaders are no longer able to study the successes and failures of other nations who have previously attempted to launch a CBDC. Yet, Beijing leadership may draw on experiences from its own prior reforms and governance challenges. This article will highlight three governance principles, developed through the reforms of the twentieth and twenty-first centuries, that will give Beijing a unique advantage as a first mover in the CBDC race: (1) dual-track transition systems, (2) regional experimentation, and (3) rapid construction of regulatory systems. This paper hopes to show how China is taking a distinct approach to the initiative compared to competing states, an approach that is engrained in China’s governance experience since the late 1970s. In conclusion, I argue that China’s recent experience in a variety of transformation initiatives provides its leadership and institutions unique principles that will advantage China’s CBDC project, especially when compared to competitors working to establish their own CBDC such as the United States and European Union.

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