That thought struck me in a visit to Dalian, a port city in northeastern China. It is not just impressive for a Chinese city. With its wide boulevards, beautiful green spaces and nexus of universities, technical colleges and a massive software park, Dalian would stand out in Silicon Valley.

Dalian symbolizes how much China's most modern cities — and there are still plenty of miserable, backward ones — are rapidly grabbing business as knowledge centers, not just manufacturing hubs. No, Toto, they are not just making tennis shoes here. Try G.E., Microsoft, Dell, SAP, H.P., Sony and Accenture, which are setting up back-room operations here for Asian companies and software R.& D. centers.

"I've taken a lot of American people to Dalian, and they are amazed at how fast the China economy is growing in this high-tech area," said Win Liu, director of U.S./E.U. projects for DHC, one of Dalian's biggest homegrown companies, which grew from 30 to 1,200 employees in six years. "Americans don't realize the challenge to the extent that they should. I do have confidence in the American people, though, to take the challenge."

Because of Japan's long colonization of this area in the first half of the 20th century, Dalian has a pool of people who know Japanese. And because of its proximity to Japan and its abundance of Internet bandwidth, and parks and golf courses that attract knowledge workers, Dalian has become the Bangalore of China — the center for outsourcing by Japanese businesses that want to tap China's low-cost brainpower. Japanese companies can hire three Chinese software engineers for the price of one in Japan, and still have change to buy a room full of call-center operators (starting salary: $90 a month).

Although Japan is still deeply resented for its wartime abuses in China, young Chinese have not let that stop them from working as data-entry technicians, software programmers or call-center operators for Japanese companies — some 2,800 have set up in Dalian — in order to get onto the first rung of the high-tech ladder.

"We have 22 universities and colleges with over 200,000 students in Dalian," the city's mayor, Xia Deren, told me. More than half graduate with engineering or science degrees, and even those who don't are directed to spend a year studying Japanese or English and computer science.

"The Japanese enterprises originally started some processing industries here," the mayor added, "and with this as a base, they have now moved to R.& D. and software development. . . . In the past one or two years, the software companies of the U.S. are also making some attempts to move outsourcing of software from the U.S. to our city."

Although some of what the mayor says gets lost in translation, he gets it — and we should, too: "The rule of the market economy is that if somewhere has the richest human resources and the cheapest labor, of course the enterprises and the businesses will naturally go there," he said.

Just as in manufacturing, he added, "Chinese people first were the employees and working for the big foreign manufacturers. And after several years, after we have learned all the processes and steps, we can start our own firms. Software will go down the same road. . . . First we will have our young people employed by the foreigners, and then we will start our own. It is like building a building. Today, the U.S., you are the designers, the architects, and the developing countries are the bricklayers for the buildings. But one day, I hope, we will be the architects."

The Chinese certainly want to believe it's inevitable that they will move from basic software outsourcing to design, but even a top Chinese science planner acknowledges that it won't be easy. Xu Kuangdi, president of the Chinese Academy of Engineering, said to me that for China to advance, "we have to build more products from our own intellectual property." But in software, he added, that will require "improving the innovative capability of the younger generation," which will require some big changes in China's rigid, rote education system. Chinese officials, he said, are thinking about such changes right now. I wouldn't bet against them.

Have your kids finished their homework?