DALIAN'S plans to become China's northeast trading and financial capital are gathering pace despite an awareness that the ambition will not be achieved overnight. The heavily industrialised city in the southern tip of the Liaodong peninsula has no qualms about its potential to become a 'northern Hong Kong' based on entrepot trade. Massive foreign capital is what Dalian needs, rather than the spillover from its neighbours. 'Dalian is the window of the northeast of China. For a long time, this city, together with Shanghai, has been the economic pillar of China,' Mayor Bo Xilai said. 'About 90 per cent of the goods from northeast go through the port of Dalian to the rest of China and the world,' he said, referring to the hinterland of the provinces of Liaoning, Jilin, Heilongjiang and the northern part of Inner Mongolia. Dalian, a 12,500-square kilometre city with a population of 2.4 million, was ratified by the Chinese government as a coastal open city. Its economic development has hinged on the development of its port facilities - the Dalian Port. Rapid economic growth and the transition to a market economy exhausted the port's 60-million-tonne handling capacity, and a second, bigger port at Dayao Bay is under way. It will have 90 berths and a capacity of 100 million tonnes. It will also have a 10-million-tonne grain port. Mr Bo said negotiations were taking place with the Port of Singapore Authority for construction of the Dayao Port and co-operation in cargo transportation. A highway is being built to link Dayao Port to the main state roads connecting Dalian to other parts of the country. The railway system to the provincial capital, Shenyang, and Harbin will be electrified and Yantai in Shandong province across the Yellow Sea will also be connected by means of rail. The city, a one-time centre of Russian and Japanese colonials is anxious to get the go-ahead from Beijing for its first 13.9 km metro railway line. Liaoning is one of the country's most industrialised provinces and major state-owned heavy industrial enterprises are based there. However, a lot of these enterprises are on the verge of bankruptcy. Dalian, which is in Liaoning, has been affected by the bankruptcies and has been searching aggressively over the past two years for foreign investment - a campaign led by Mr Bo. Nine foreign banks - two from Hong Kong, six from Japan and one from Korea - now have branches in the city. At the end of June, 4,543 foreign-invested projects, worth US$6.67 billion, had been approved. Hong Kong and Macau investors head the list, with 1,688 projects worth US$2.5 billion. While the Japanese presence in the city dates back to the pre-war days of Manchuria, where it ruled for 40 years, the Koreans participation started when direct flights from Seoul to the city began early this year. Japanese electronic giants such as Toshiba, Panasonic and Canon have relocated some of their factories to the city's 24 sq km Dalian Economic and Technological Development Zone, located 33 km from the city district and established in 1984. Director of the Foreign Economic Relations and Trade Commission Hong Yuandong said that at a time when the number of foreign investors entering Dalian was declining, those from Korea were on the increase. Joint ventures account for 11.7 billion yuan (HK$10.90 billion) in assets, representing one-quarter of the city's total assets. Dalian wants to maintain a growth rate of between 11 to 12 per cent this year, but its leaders have conceded it will be difficult as there are no signs of an end to the macro-economic measures that have put the squeeze on bank credit nationwide. The growth rate for gross domestic product is set to slow down, compared with last year's 19 per cent increase to 54 billion yuan from 1993. The city's export and import trade was 3.5 billion yuan last year and per capita income was 4,040 yuan . Exports are expected to reach 2.3 billion yuan this year. Industrial exports totalled 8.5 billion yuan for the first six months and officials expect the volume to reach 20 billion yuan by the end of the year. Last year, the total was 12.7 billion yuan. Despite optimism about positive growth, industrial exports are set to slow down this year due to the effects of the austerity measures. 'Industrial investments will take second place with the emphasis on infrastructure,' said deputy director of the Dalian Economic Committee, Bi Shiguang. The city's credit from the central government for the first six months was 450 million yuan, a dramatic decline from the 560 million yuan for the corresponding period in the previous year. Officials are still fighting hard to control inflation although the rate has dropped from last year's 24 per cent to 16 per cent . Director of the Dalian Planning Commission Wang Chengmin said there was an emerging trend that foreign companies investing in the tertiary sector would shift their money to the primary and secondary industries.