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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 1 hour ago - Politics & Policy

Coronavirus dashboard

Illustration: Annelise Capossela/Axios

  1. Health: Fall and winter COVID surge "unlikely" if people get vaccinated.
  2. Politics: School boards are the next political battleground.
  3. Vaccines: Pfizer begins application for full FDA vaccine approval — Moderna says its COVID booster shot shows promise against variants.
  4. Economy: U.S. adds just 266,000 jobs in April, far below expectations.
  5. World: Asia faces massive new COVID surgeIndia records its deadliest day of the pandemic.
  6. Variant tracker: Where different strains are spreading.

Kevin McCarthy officially endorses Elise Stefanik to replace Liz Cheney

House Minority Leader Kevin McCarthy. Photo: Win McNamee/Getty Images

House Minority Leader Kevin McCarthy (R-Calif.) officially endorsed Rep. Elise Stefanik (R-N.Y.) to become the GOP's next House Republican conference chair during a Fox News appearance Sunday.

Why it matters: The GOP has been feuding internally over the fate of the current chair, Rep. Liz Cheney (R-Wyo.), because of her criticisms of former President Donald Trump, and her vote to impeach him for his role in the Jan. 6 Capitol riot.

Fauci: Vaccines could turn COVID-19 "surges" into "blips"

NIAID director Anthony Fauci told "Meet the Press" Sunday that if more Americans get vaccinated in accordance with the Biden administration's goals, COVID-19 surges may be replaced by "blips."

State of play: Last week President Joe Biden announced his goal to get 160 million Americans fully vaccinated by July 4, with at least 70% of Americans having at least one shot.

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