I fly to China with Cathay Pacific, the largest shareholder of which is the British based Swire Group. The Swire Group and Jardine Matheson have survived for around 200 years as major trading companies linking China with the West. It’s an astonishing achievement. Wealth creation depends on destructive creativity; capitalism only works if it’s dynamic. Half of America’s largest companies in 1980 don’t exist anymore. But half of the biggest American companies didn’t exist in 1980.

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I  arrive in Shenzhen in southern China, and gaze with wonder at the vast array of office blocks, apartments and factories. I first visited Shenzhen during the week the Tory party overthrew Margaret Thatcher. The city’s growth is a tribute to her friend Deng Xiaoping who recognised the need for China to embrace capitalism. The result benefits the world; we earn wealth from our exports to China, of course, but the country also provides us with an array of cheap goods and, increasingly, technology. Not to mention much-needed investment.

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I’m visiting China with Michael Wesley from the Lowy Institute and John Roskam and Tim Wilson from the Institute of Public Affairs. We are guests of Huawei, on whose Australian board I serve. Huawei is a tribute to capitalism’s creativity. In 1987 it was nothing. Now it has revenues of $32 billion a year. The largest telecommunications equipment manufacturers in the world are Ericsson, Alcatel Lucent and Huawei. Alcatel Lucent is French and Ericsson Swedish, but 45 per cent of Alcatel Lucent’s equipment is designed in China and around 70 per cent of Ericsson’s equipment is made there. Alcatel Lucent is building much of the equipment for our National Broadband network at its joint enterprise in China. Once the world of telecommunications and information technology was dominated by the Americans and the Europeans. Now Chinese companies are leading the technological race. As the likes of Huawei rise, so the IBMs and Nokias fall; the creative destruction of capitalism is at work. The beneficiaries are the consumers — you and me.

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I  have imagined Chinese workplaces as sweatshops. The Foxconn factory in Shenzhen employs 300,000 people. They produce iPads, Kindles, PlayStations and Xboxes — all in the one factory. I visit a Huawei factory instead. It only employs 20,000. It’s modern, air-conditioned and the workers are all on individual workplace agreements, or China Workplace Agreements (CWAs). Long hours? They work from 8 a.m. until 5 p.m. with an hour and a half for lunch and two 15-minute breaks for morning and afternoon tea. The company pays them above the standard rate so as to attract the best workers.

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It wouldn’t be good politics to tell Australians they should adopt the practices of the Chinese labour market.But this clean, productive factory is in a communist country. Normally, we associate communism with harsh and oppressive regimes. Which proves a point. Modern China is less communist and more capitalist than many Western countries.

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Those who still think China is ‘communist’ have missed half a century of history. Deng Xiaoping coined the phrase ‘socialism with Chinese characteristics’, which was a euphemism for ‘if you want to make money, throw away those musty books on Marxism.’ Jiang Zemin went further; he liked the phrase ‘socialist market economy’. That’s a euphemism for what Hugh Gaitskell and Rab Butler used to call ‘the mixed economy’. Mind you, China’s economy is a good deal less regulated than the Britain of the Fifties and Sixties.

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We fly to Shanghai, truly one of the ten cities you have to see before you die, and visit the Huawei research centre. They have tens of thousands of highly qualified scientists, mathematicians and physicists working on new technological solutions. New solutions mean cheaper and better products for consumers. Capitalism at work. We didn’t go to the communist world to buy technology during the Cold War. But we have to go to the ‘socialist market economy’.

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From Shanghai I go on to Beijing alone to see my old friend Yang Jiechi, China’s foreign minister. We have lunch together at the St Regis hotel where I once said that if America and China went to war over Taiwan we wouldn’t automatically join in.

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After the lunch I reflect on why Australian academics and commentators are prone to look at China through the prism of a future war with America. If it happened it would be Armageddon. We’d serve our interests better if we worked full-time to make the Sino-American relationship work. There’s no more important bilateral relationship in the world today. I can’t help but wonder why academics like Hugh White think we have to downgrade our relations with America to get on with China. The challenge for Australia is to maintain its alliance-based relationship with America and build a solid multi-faceted one with China.

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There’s an element of the political class in Australia who think we should either oppose Chinese power hand in hand with a belligerent America or else downgrade ANZUS to keep the Chinese happy. They’re dumb choices. John Howard and I think our greatest foreign policy achievement was to build both the American relationship and ties with China.

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I  head back to Shanghai by train. It is 1,300 kilometres and takes five hours. That’s an average speed of more than 240 kilometres per hour! China is a happening nation. We shouldn’t fear it.