Legalizing China's Economic Coercion Toolkit

Abstract

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 suc-cesses 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 high-light 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 transi-tion 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 insti-tutions 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.