The plant is a boon for China's efforts to develop its technology industry, as well as revitalizing the Dalian area in the northeast-considered the country's rustbelt-a priority of the current crop of Chinese leaders.

But the plant, slated to begin production in 2010, won't initially make microprocessors. Instead, it will make chip sets, which connect microprocessors to other parts of a personal computer, using manufacturing technology a generation or two behind the state-of-the-art.

Underscoring Intel's ambitions, CEO Paul Otellini suggested the plant's technological level could change if the U.S. government eases restrictions on the export of advanced-technology goods.

The proposed plant is to be a wafer-fabrication facility, or "fab," and is expected to employ more than 1,000 workers. But wages comprise a relatively small part of the cost of operating a fab.

Instead, analysts say, Intel stands to benefit by being perceived as a substantial player in China. Perhaps more important, it could increase any influence over Chinese officials in negotiating issues such as protecting intellectual property.

A fab in China could also help Intel create localized products if the country adopts special standards for technologies. But the company might also be in a better position to lobby China against this.

Intel executives and Chinese officials have offered no details about specific incentives the company received. But Dalian Mayor Xia Deren said the city did use "special policies consistent with "Document 18," a central-government circular issued in 2000 that outlined tax breaks and other incentives local governments could use to attract private-sector investment in semiconductors and software.

Mr. Otellini said Intel's choice to build the plant in China reflects in part the advantages of building in places that offer better financial incentives than the U.S. does.

He cited testimony he gave before a U.S. government panel two years ago estimating that, because the U.S. offers less-favorable tax breaks and incentives, it costs $1 billion more to build a fab in the U.S. than elsewhere.

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