It's late afternoon at the beach. The amber sands are covered with hundreds of sun worshipers. Above the high-water mark, young men gather at a ramshackle beachfront health club, lifting rusty weights while comparing each other's physiques. Closer to the water dozens of men, as brown and relaxed as old walruses, play cards or sunbathe under the warm northern light. Across the street, in sun-dappled open-air cafes, pretty college girls sip draft beer with their lunch.

Nothing unusual about this, if this were a scene in northern Europe. But we're in northern China. Here, in the picturesque former German concession city of Qingdao, people move to a decidedly different rhythm than elsewhere in China. Yes, economic progress has come here, too, and business is booming, with investors from Japan, South Korea and Hong Kong starting to pour in. But the 2 million residents of Qingdao are taking it all in stride.

Just over 100 years ago--the blink of an eye in Chinese history--this remarkably pretty city on the shores of the Yellow Sea was occupied by the Germans, after their government forced Beijing to sign a 99-year lease for the city. In that same year, 1898, the British pressured China to hand over a little known southern island called Hong Kong on similar terms. For 17 years, the Germans endeavored to re-create an authentic piece of Deutschland on the craggy coast of northern China. Although the Germans have been gone for more than seven decades now--and the population is almost entirely ethnic Chinese--their legacy is still felt in countless ways large and small.

The visible reminders have become hallmarks of the city itself, for much of Qingdao is an open-air museum of lavish 19th-century European architecture. Other Chinese cities can claim colonial structures and neighborhoods--Shanghai has the Bund, and Dalian boasts Cyrillic street signs and onion-domed banks built by architects of Russia's last czar. In those cities, however, few old buildings have been maintained, and most are being pulled down. But virtually the whole of Qingdao's 19th-century Teutonic civic structures have been been proudly, even lovingly preserved. The Badaguan (Eight Passes) district was Qingdao's Beverly Hills. And even today it is easy to imagine just how jolly good life must have been for the affluent Germans who lived in the lavish seaside villas that spill down gently undulating hills toward the sea. Here, hundreds of mansions and villas appear to have been transported lock, stock and Teutonic tower from Germany only yesterday, their red-tile roofs peeking through the forest. Nearly a third of Qingdao is given over to parks and green areas, and the city's name means "green island."

In spring, peach, cherry and magnolia trees bloom in a riot of scent and color, while summer brings Qingdao the tart aroma of crab apples and the welcome shade of maple trees. Relishing their alpine autumns, the Germans also left behind hundreds of great old oaks and towering elms, which today line the city's litter-free boulevards.

While most of Qingdao's larger colonial homes have been taken over by businesses, including some foreign firms, the city's single most impressive building must be the residence of the former German governor. The story goes that in 1903, when the kaiser got the bill for the huge castlelike structure, he immediately sacked the extravagant governor and demanded his recall. Some time after that the residence became a hotel. Today the eerie Gothic structure offers nine large bedrooms and two suites. When climbing the dark, elegantly carved wooden stairway to the second story, a visitor half expects to hear melancholy notes of organ music. Mao Zedong was a regular here, and the largest suite has his name on it. For just over $200, a guest can sleep in the room, which has been kept exactly as the Great Helmsman liked it: rock-hard mattresses, soft-bottomed sofas and plenty of spittoons within easy range. Regular rooms are available for about $70.

A lesser-known regular at the residence was China's authentically sinister defense minister, Lin Biao. It was said that Lin, who died in a mysterious plane crash in 1971 while fleeing from Beijing to Moscow after a failed assassination attempt on Mao, had an extreme aversion to sunlight. I asked the hotel's day manager if the legend was true. She seemed to confirm it by stating that Lin always insisted that when he arrived, all the building's heavy curtains be kept closed throughout the day.

Thanks to the drawing power of its remarkable beauty and unique history, Qingdao takes in $90 million annually from some 9 million visitors. Virtually all of them are domestic tourists, which makes Qingdao the country's best-kept travel secret. Though the locals eat strictly regional Chinese cuisine at home--largely seafood with ginger, garlic and, of course, beer--the hotel restaurants carry on the German culinary traditions with spaetzle and bratwurst. Some of the college kids say their grannies still have several German recipes at home, and residents enjoy a street snack with a distinctively European flavor that you won't find elsewhere in China, consisting of hot buns stuffed with beef, potatoes and gravy.

Though the Chinese government has always considered the earlier German occupation of its port a "great shame," there are a few places where the German influence is openly acknowledged: At the Navy Museum, the impact of the Germans on the Chinese navy is explored. Near the waterfront there's a statue of a suspiciously buxom Chinese maiden dating from early in the century. And the current government has no plans to pave over the history. In fact, city officials have decreed that all future developers will be allowed to operate only in the new eastern part of the city, so as to preserve the leafy charms of the Eight Passes district.

One reason for the mellowness of Qingdao's folks might stem from its two best-known products: beer and wine. Arguably the only Chinese brand name known outside of China, Tsingtao beer has been brewed in the city since 1903, when a joint German-British venture set up the brewery. Today, using barley imported from Canada and a 50 percent mixture of rice and hops from northern China, Tsingtao's 1,700 employees produce 300 tons of the crisp, slightly sweet amber fluid. One explanation for its appealing sweetness, say the brew masters, is that the water used for Tsingdao is the best in the world: It comes from icy springs deep beneath the granite slopes of China's famous mountain, Laoshan, via a dedicated nine-mile pipeline.

Eight years ago, the brewery joined forces with the local government to launch the city's first "international" beer festival. Held every August and lasting 15 days, the event attracts more than 700,000 beer lovers. Domestic and foreign pop singers from Japan and Korea are invited to perform, and there are parades and beauty queens aplenty. But the festival's chief aim appears to be, as the city's own brochure insists, to "have dozens of beer brands from different countries to make visitors feel intoxicated." The event has proved decidedly more popular than the city's other summer celebration, the Seaweed Festival.

An hour's drive from Qingdao brings travelers to the city's other major moneymaker, wine. The Huadong Winery was set up a decade ago by a Hong Kong-British wine lover who believed that the area's lime-rich soil and dry sunny climate was ideal for wine. Today Huadong's 58 staff members are guided by the former manager of a sewing factory, Lin Keqiang.

For centuries the Chinese have liked a tipple, as many of their poets have attested, including one who drowned when he stepped off a boat to walk across moonbeams. But over the ages, most Chinese liquor consumption has been a harsh grain alcohol called Bai Jiu.

"Bai Jiu makes you insensible," says Lin, "but wine makes you intelligent." He sips thoughtfully on a Huadong red.

Notwithstanding the area's unique history and culture, its most revered cultural icon is neither Bacchus nor bratwurst, but the famed philosopher Confucius, who was born in Shandong province. Though trashed and dethroned by Mao in the 1960s, the old master has been resuscitated by the current leaders as a suitably frugal and ethical figurehead for China's new economic order.

Each September, Qingdao honors him by hosting an international Confucius Conference, at which all aspects of his life and philosophy are discussed. How well the thoughts of the Great Mentor go down in today's world, however, is open to question, especially among China's millions of young career women.

It was Confucius, after all, who said: "Man is the representative of Heaven and is supreme over all things. A woman's business is simply the preparation and supplying of wine and food."

When I asked Maggie Wang, a university graduate working for a branch of the Qingdao city government, what she thought of this view, she burst into laughter. "If he were here now," she said, "I would pour this beer over his head to cool him down!"

For information on travel to China, contact the China National Tourist Office, 212-760-8218, www.cnto.org or www.cnta.com. For general info on Qingdao, check out www.qingdaochina.org.

As a journalist based in Hong Kong for 15 years, Steven Knipp was a frequent visitor to Qingdao and other Chinese cities.