Seeking to pose a stiff challenge to India's booming software industry, China has started constructing the world's largest software and IT service hub in Dalian, a coastal city in Northeast China's Liaoning Province.

"Stretching over 40 kilometres, we'll build Lushun South Road into not only China's Silicon Valley, but the world's leading IT city with a first-class environment," Mayor of Dalian, Xia Deren said at the launch ceremony.

The development of the Dalian Tiandi Software Hub will involve a total investment of 15 billion yuan from Hong Kong-based Shui On Group and Dalian-based Yida Group.

The city plans to increase its software exports almost eightfold to $3.5 billion by 2012. In 2006, Dalian exported $450 million worth of software products and IT services, accounting for almost one-third of the country's software outsourcing revenue.

The software hub is a mixed project comprising office buildings, residential and commercial properties, as well as recreational and educational facilities, chairman of Shui On Group, Vincent Lo said.

Occupying more than four million square metres of ground floor area, the hub will take 7 to 10 years to complete, he said.

Phase I of the project will mainly cater to the needs of Japanese and South Korean companies, while its master planning will take into consideration target tenants like IBM and Oracle, he said.

"We are keen to support Dalian in its bid to become the leading IT outsourcing and service centre in Northeast Asia," he said.