Construction of the world's largest software and IT service hub has begun in this coastal city of Northeast China's Liaoning Province, its mayor said on Sunday.

"Stretching over 40 kms, 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," said Mayor Xia Deren at a ceremony to launch the Dalian Tiandi Software Hub.

The development 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, while it exported $450 million worth of software products and IT services last year, accounting for almost one-third of the country's software outsourcing revenue, according to CCID Consulting, a Beijing-based IT consultancy.

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

Occupying more than 4 millionsqm of ground floor area, the hub will take 7 to 10 years to complete, Lo 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, Lo said.

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

The software hub is part of the phase II development of the Dalian Software Park being developed by Shui On's local partner Yida Group.

The software park, with a total floor area of 1.6 millionsqm, has been leased out to more than 340 tenants, including 32 Fortune 500 companies, said Sun Yinhuan, chairman of Yida Group.

Yida is partnering with firms like China's IT giant Neosoft and Singapore-based Ascendas for the phase II project, Sun said.