Here in Chengdu, in China's Wild West, hundredsof high-octane multinational companies, including Alcatel,Corning, Ericsson, and Microsoft, have establishedbranches. An hour and a half's drive from the city,Phoenix-based ON Semiconductor Corp., which spun offfrom Motorola Inc. in 1999, operates a joint-ventureIC assembly-and-test plant with 2000 workers. It isnow building a semiconductor facility next door; the150-millimeter wafer fab will be the first in westernChina. Negotiations are also under way with IBM forwhat would be its largest software outsourcing centeranywhere. In 2004 alone, Chengdu attracted $7 billionin foreign capital investments, making it the fastest-growinghigh-tech center in western China. Domestic powerhouseshave also come, including China's leading foundry,Semiconductor Manufacturing International Corp. (SMIC),based in Shanghai.

In some ways, the dizzying influx makes no sense. If you look on a map, Chengdu isn't on the way to or from anywhere. It sits in the middle of the southwestern province of Sichuan, on a wide, flat plain 1500 kilometers southwest of Beijing and 1600 km northwest of Shanghai [see China at a Glance in this issue]. Although Chengdu dates back more than 2400 years and at one point was renowned for its lively trade and intellectual life, for most of the last two millennia it was little more than a sleepy backwater. After the communists came to power in 1949, Mao chose Chengdu as the base for their most sensitive military work, specifically because it was so cut off from the world.

Six years ago, though, Beijing realized that industrialization was bypassing China's inner provinces, so it launched the Great Western Development Strategy [see photo, "Construction Ahead"]. It began funneling billions of dollars into the hinterlands, to extend new highways, rail lines, and telecom links and build new international airports, industrial zones, and power plants. Chengdu was reborn.

These days, Chengdu is at the frontier of China's economic boom. Although the coastal provinces and municipalities—from Beijing and Tianjin in the north to Shanghai, Guangzhou, and Shenzhen in the south—still generate 90 percent of Chinese exports and attract an even greater proportion of foreign investment, there's still plenty left over for Chengdu. Picture the industrialized east as the arc of a drawn bow and the Yangtze River as the arrow, suggests Li Gang, director of foreign investment for Chengdu's high-tech development zone. "We are the nock in the arrow," he says. Its other end, the tip, points toward the world.

Last year the city landed its biggest fish yet, when Intel Corp., in Santa Clara, Calif., after two years of negotiations, announced it would build a $375 million factory for assembling and testing its chips. Intel currently employs about 4000 people in China and has a similar assembly-and-test plant in Shanghai and a research-and-development center in Beijing. [To learn about another Intel project in China, see The Panda Connection in this issue.]

So why Chengdu? City promoters tout its cheap and stable labor, free land, and generous tax breaks. But it's not alone. The growth rate in some of the more remote cities exceeds 40 percent, notes Ian Yang, Intel's country manager for Intel China Ltd. But companies that want to succeed in China also feel pressure from Beijing to move west. "It's a combination of where the government is heading, with its 'Go West' policies, and where the market is growing," Yang concludes.

Where Chengdu separates itself from other would-be tech havens is in its combination of manufacturing capability and its bargain-priced engineering talent. The city's 29 universities turn out about 40 000 graduates each year, adding to the half-million professionals who now call the city home. An engineer with a bachelor's degree, for example, earns anywhere from $130 to $400 per month in Chengdu—20 to 30 percent less than on China's east coast. "We have an almost endless supply of capable and skilled people," says Wang Lin, deputy director of the city's 82-square-kilometer high-tech park and a member of the all-powerful Communist Party committee that oversees its development.

The brainpower of Chengdu's engineers is on display at the Alcatel Optical Communications R and D Center. There, 180 design engineers work on software, hardware, and systems integration for the company's optical-fiber products. It is one of five Alcatel centers devoted to optical communications; the others are in France, Italy, Germany, and the United States. The average age of the company's Chengdu engineers is 29, says Wang Xianming, the center's R and D director. Although most have never set foot outside their hometown, they still need to be able to work effectively with colleagues and customers halfway around the globe. Wang himself interacts daily with his counterparts at the other Alcatel labs.

Alcatel's Chengdu operation is, in other words, global. Some Chinese fret that their country's rise has been a "headless boom"—that too often, foreign investors leave their best technology and ideas at home. Many of the R and D centers that have been set up by foreign companies recently are directed toward "localizing" existing products for the Chinese market, rather than developing products for international consumption.

That's not the case at Alcatel. Wang notes with pride that his big priority this year is fulfilling a $1.7 billion contract with SBC Communications Corp., in San Antonio, to extend its new fiber-optics network to 18 million U.S. households.

Twenty-five years ago, most people would have been astounded to hear that a U.S. telecom network was being developed by a group of researchers in a remote interior city of China. These days, it's fast becoming the norm.