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Illustration: Sarah Grillo/Axios

DAVOS, Switzerland — The heavyweights of Western-style capitalism in Davos don’t yet know how to deal with China's authoritarian state capitalism.

The big picture: For much of the past 70 years, the behavior of Western companies has been shaped by Western laws and regulations, and by the vagaries of Western markets.

  • Now China is the first non-Western, authoritarian country with both the market size and the will to reshape the behavior of multinational companies, and even Western governments, to better fit its own interests.

Why it matters: “The fact that the Chinese are not in any way aligning with or integrating with Western-style capitalism is something that these CEOs are having a hard time coming to terms with,” said Ian Bremmer, president and founder of Eurasia Group, in an interview at Davos with Bloomberg.

Case study: China telecom giant and 5G leader Huawei has received tens of billions of dollars in various forms of government assistance, according to a Wall Street Journal report.

  • This has helped it offer its products and services below market cost — and gives it an edge over competitors that top executives at Western companies are reluctant to acknowledge.
  • The U.S. government has urged allies not to use Huawei 5G because of security problems and the company's close ties to the Chinese government, even threatening to withhold intelligence sharing.
  • Despite the warnings, the British government looks set to allow Huawei into its telecommunications network, and Germany may follow.

What they’re saying: "[I]n some cases, the geopolitics are just slowing down 5G development as a whole, unfortunately,” Erik Ekudden, chief technology officer for Ericsson, a manufacturer of 5G equipment and Huawei competitor, said in an interview with Axios.

  • "It will be a huge expense for the world if people have to choose” between China and the U.S., Neeraj Aggarwal, the Asia-Pacific chair at Boston Consulting Group, told Axios.

The bottom line: Acting against the economic interests of companies is deeply unpopular among top Davos leaders.

  • Yet, with the rise of China’s authoritarian capitalism, that may be what is required to preserve the security of critical information infrastructure — and the fundamental freedoms of liberal democracy.

Go deeper

Updated 30 mins ago - Sports

Olympics dashboard

Team USA's Simone Biles watching the women's uneven bars final at the Olympic Games in Tokyo, Japan, on Sunday. Photo: Jamie Squire/Getty Images

🚨: Simone Biles will compete in her final Olympic event

⚽: U.S. women's soccer team falls to Canada in semifinals, ending chances at gold

🏋️‍♀️: Laurel Hubbard becomes first openly trans woman to compete at Olympics

🤸: U.S. gymnast Jade Carey wins Olympic gold in floor exercise final

🪧: IOC "looking into" American Raven Saunders' Olympic podium protest gesture

📷In photos: Day 10 Olympics highlights

🏳️‍⚧️: Axios at the Olympics: Games grapple with trans athletesTrans athletes see the Tokyo Games as a watershed moment

Go deeper: Full Axios coverage

Updated 51 mins ago - Sports

Laurel Hubbard becomes first openly trans woman to compete at Olympics

Laurel Hubbard. Photo: Stanislav Krasilnikov\TASS via Getty Images

New Zealand weightlifter Laurel Hubbard made history on Monday as the first openly transgender female athlete to compete at the Olympics.

Why it matters: The presence of trans and nonbinary athletes at this year's Games has been celebrated by LGBTQ+ rights advocates, but stirred controversy among critics, who argue trans women have an unfair advantage even after taking hormones to lower their testosterone.

Index fund investors saved $357 billion over last 25 years

Illustration: Sarah Grillo/Axios

Investors who’ve opted to passively track the stock market haven’t just outperformed most active fund managers. They’ve also saved a ton of money in fees while doing it.

Why it matters: There are loads of active fund managers aiming to beat the returns of funds that track indexes like the S&P 500.

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