THEY ruled the city little more than half a century ago, but the Japanese are back in Dalian as conquerors of a different kind - as the city's biggest trading partner. Dalian was the first Chinese city to shake off the yoke of the Japanese in 1945, but they have returned to invest in 1,032 projects worth a total of US$1.95 billion. Of the nine foreign banks in the city, six are Japanese which, because of the soaring yen and domestic costs, are also looking for cheaper manufacturing bases. Dalian provides a solution, especially in labour-intensive industries, because factory workers are available at about 10 per cent of the cost of those in Japan. The Canon Group in 1989 established Canon Dalian Business Machines, with an investment of 25.5 billion yen (about HK$2.16 billion), to set up a plant in the city's 24 square kilometre Economic and Technological Development Zone. Canon Dalian president Teruo Morikawa said the Dalian plant ensured competitiveness in the cartridge business. He said there were 900 Japanese companies, both sole and joint ventures, in Dalian and about 210 of those had set up bases in the zone, including Toshiba and TDK. 'Not only is Dalian near to Japan, its historical background is familiar to us,' Mr Morikawa said. Reminders of Japan's occupation are everywhere - trams built by the Japanese in 1909 still chug along the main streets - and many Japanese businessmen in the city speak fluent Chinese. Public Utilities Administrative Bureau director Yu Changmin says there is no plan to scrap the pollution-free tram system. Japanese architecture dominates the tranquil Nanshan district where property giant Mori Building is proceeding with its first commercial development in a city where Japanese companies have difficulty in finding office space. Officials say catching up quickly in terms of investments are Koreans, stimulated by the introduction this year of direct flights between Dalian and Seoul. Korean capital investment has jumped 87 per cent this year against the corresponding period last year to bring the total to 358 approved projects worth a total of US$300 million, mostly in manufacturing plants. Jindo Dalian started manufacturing containers in the Jinzhou Economic and Technical Zone in 1993. Customers include Genstar, Needloyd and Maersk from its 807,300 sq ft plant, which has an annual turnover of US$50 million. Managing director Il-hwan Cho said the move to the mainland was inevitable as labour and manufacturing costs in Korea were too high. 'Here the labour costs amount to less than five per cent of the total costs, compared with 20 per cent in Korea,' he said. Mr Cho said the company's factories in Korea had run at a loss for the past two years. A Korean industrial park measuring between one and two sq km will be established in the Jinzhou district to accommodate about 100 enterprises. Economic relations with another neighbour, Russia, have not really taken off despite the fact that Dalian was once ruled by Russians and still boasts Russian architecture. Russian traders owe Dalian about nine million yuan (about HK$8.39 million) but Dalian officials are not optimistic about recovering the sum. One official said: 'They [Russians] themselves need help first.' The contrast with the formidable alliances with Japan and Korea could not be greater.