This paper discusses the role of knowledge and education in the development of Hong Kong and Shanghai in light of the recent economic crisis in the East Asian region. The basic assumption is that education can play a facilitating role in societal development as it is rested on a strong and relevant knowledge base that can inform policies. Four major issues in educational development are illuminated in the discussion--quality and equality, relevance of education, policy-making, knowledge production and utilization. It is argued that education's role as facilitator of development is frequently undermined by the poverty of knowledge, the inability of educators to avail a broad knowledge base to policy-making, and the constraints on knowledge creation and utilization. Because of these weaknesses, structural problems in the education systems have been allowed to perpetuate, thus limiting the developmental capabilities of both cities in the new information age.