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German software giant SAP AG brings its toughest jobs to Dalian, a port city in China's northeast.

In a sunny, spacious office at a leafy business park, 200 technicians help run software that manages bank transactions in Switzerland and auto manufacturing in Michigan.

"Nighttime support for a Swiss bank is one of the most difficult things you can do, and we do it in China," said Andreas Reuther, SAP's vice president for global support.

Along with SAP, Hewlett-Packard Co, IBM Corp, Britain's BT Group PLC, Japan's Yokogawa Electric Corp. and some 230 other foreign companies have flocked to Dalian in the last decade. Now, a critical mass of development is coming. Ground broke this year for both a US$2.5 billion Intel factory and a US$6.5 billion nuclear power plant for the city. Cranes line the busy waterfront as office and apartment towers rise at a furious pace.

A former Japanese colony on green rolling hills, Dalian is a model for the transformation that Chinese leaders want to see in the rest of their country. The government is eager to raise China's status from low-skilled factory labor to higher-paid technology jobs. A 15-year plan issued last year promises tax breaks and other aid to software, genetics, aerospace and other high-tech businesses.

"Our goal is to build up Dalian as a new leading city in global software and service outsourcing," said Jin Guowei, deputy director of Dalian's technology bureau. "We want to be like America's Silicon Valley, Ireland's Dublin or Bangalore in India."

Companies say they are drawn to Dalian by a polyglot work force, local spending on communication and other infrastructure, help in hiring, tax breaks for high-tech investment and free rent in the city's brick and glass office park. Wages for a new college graduate in Dalian are about US$250 per month, company officials said - about the same as in India but lower than in Beijing or Shanghai.

The revenue of US$1.9 billion generated last year in Dalian by operations such as writing and testing software, operating computer systems and accounting and finance is still dwarfed by outsourcing in Bangalore. The Indian city, Asia's leader in the industry, brought in US$11.3 billion from such operations in 2006.

But Dalian's revenues grew 50 percent in 2006, compared to Bangalore's 32 percent growth. And, at US$11.8 billion, according to the China Software Association industry group, China's total outsourcing revenues were similar last year to Bangalore's.

Investors say Bangalore is strangling itself by failing to invest in infrastructure, while Dalian spends heavily on roads, power supplies and telecommunications.