Dalian,a port city in northeast China's Liaoning Province, has launched an ambitious plan to build a super software industry corridor along its southern coastline.

The corridor is located in a 133 sq.km area along the city's South Lushun Road, a hilly seaside scenic spot.It has a land areaof 8.6sq.km and a construction area of 4million square meters with a planned investment of over 15 billion Chinese yuan (US$1.81 billion).

On this fantastic long and narrow area, a software export-oriented town will be built within four years, where 300,000IT professionals can be employed.

Local official said that the municipal government has chosen one of the best areas in the city for software development and invited six international design firms, including the German-based Obermeyer Consulting Engineers, the US-based Gensler Consulting and Architects, to hammer out a tailor-made master plan for the software corridor.

"The software industry needs numerous professionals. We try our best to create a favorable environment for their work and living accommodations," said Tang Yujie, chief of the software section of the city's Bureau of Information Industry.

This is a second-phase project for the five-year-old Dalian Software Park, said Tang. The construction of the software corridor is aimed to attract more overseas software developers and build this city into a Bangalore-like outsourcing hub for information technology.

"After I visited India's software metropolis of Bangalore, I found that a software park is nothing but the organic integration of human brains plus computers and beautiful environment. In terms of its surrounding environment, the area along the South Lushun Road is by no means inferior to India's Bangalore," Tang said.

"Dalian shares many similarities with Bangalore, the Indian city as a top outsourcing destination for US firms. Such as the temperate climate, advantageous geography, neighboring with many universities, and Dalian can vie Bangalore for its low cost of brainpower."

A software engineer earns 2,000 dollars a month on average at a firm in Bangalore, but might get only 500 dollars in Dalian.

Meanwhile, Bangalore's investments in telecommunication and other supporting infrastructure lag Dalian's. Tang, who visited Bangalore in February this year, noted that China's inter-city roads are much better than those roads in India.

Over the past five years, while Bangalore has consolidated its position as the major provider of outsourced services to the United States, Dalian has raked in money from the Japanese market.

Many software and business process outsourcing (BPO)firms have mushroomed in Dalian, which is home to old petrochemical and shipbuilding plants. The firms are steadily establishing themselves as the outsourcers of choice in the Japanese market. Dalian Hi-Think, China's largest software exporter which grew from30to 1,200employees in six years, says over 70percent of its 12-million-dollar revenues now comes from Japanese clients.

Analysts say that the key element in this strategy is not a person or company, but the place. Dalian has been a critical link in Sino-Japanese trade since the 1930s,when it was an international trading center. Then, its proximity to Japan, just an hour's flight away, made it a favorite with the Japanese businessmen.

Though Dalian has had a large Japanese-speaking population, it is investing heavily in training locals in the language. City streets sport many signs in Japanese and restaurants offer perfectly prepared sushi and katsu-dong. Japan's unique management styles, language and social practices, which made the process of outsourcing difficult for Japanese firms, are also well understood in Dalian.

The city's Bureau of Information Industry says Dalian's outsourcing revenues from Japan this year is expected to top last year's income.

During the first five months this year, the city received 79million dollars in outsourcing revenues from Japan. Last year, it realized US$120million of software exports to Japan.

However, the city's software industry lacks high-end export products with self-owned intellectual property rights, said Zheng Shiyu, vice president of the city's software park.

"What we are doing is low-end outsourcing, mainly in labor-intensive data processing, coding, unit test and overall test, demand analysis and set solution," said Zheng.

The reasonable way out for its software industry is to learn from software outsourcing business with Japan and then evolve its own way of higher value-added IT products in the future, he said.

"A successful story of Chinese home electronics industry shows that China's home electronics manufacturing originally started from raw material processing and then gradually became the hub of global manufacturing. Dalian's software industry should follow this principle."

The municipal government says developing the IT industry is one way to upgrade its traditional heavy industries in the country's drive to revitalize the economy in Northeast China.

It has pledged to offer selected local software companies support in taxation, training, financing and marketing as part of a plan to help them win a greater share of outsourced business from Japan, even the United States and Europe.

Meanwhile, the local government has also helped software firms in the city adopt the SEI CMM5(capacity maturity model) assessment, a model for judging the maturity of their software processes. Among the six CMM5firms in the country, Dalian has two. One is Hi-Think, the other is Haihui Sci-Tech.

In the last five years, Dalian's software industry has managed to grow over 50percent annually in terms of sales volume, which reached 4.5billion yuan (US$544million)last year.

At present, more than 20of the world's top 500enterprises have settled in the software park, such as IBM, HP, GE, Microsoft, Dell, SAP, HP, Sony, Nokia and Accenture.

"But we have a mixed feeling behind the rapid growth of Dalian's IT industry," said Tang Yujie.

"Insufficient supply of qualified talents is a bottleneck restricting the development of our software industry," he added.

Dalian now is lack of IT professionals from the blue collar to senior IT talents. Earlier this year, GE came with a recruitment of 5,000staff and HP also wanted 5,000,IBM even required for 20,000.However,the city cannot meet these firms' increasing demand for IT professionals.

To tackle this problem, the local government has announced a 2.4-million-dollar fund to pay bonuses to high-level software talents. As a longer-term solution, it has set up software departments at all 20universities in Dalian and established six private colleges. The largest one is the Neusoft Institute of Information, jointly funded by the software park and the Neusoft Group. In less than four years,8,000students have enrolled.

Meanwhile, it established an office in Japan earlier this year to enroll professionals familiar with business practices in Japan. It will also set an office in the United States late this year to attract high-end IT professionals in North America.

With the unremitting efforts of the local government, Dalian's dream to become another Bangalore is reasonable, believed analysts.

(Xinhua News Agency July 5, 2004)