'Shenzhen is a very 'go-ahead' area. They have a go-ahead mayor and organisation there with tremendous enthusiasm and commitment. We expect to play an important role in China by expanding into one of the country's most rapidly growing trade zones,' Mr Williams said.

He said Hong Kong was passed over for the facility because of the relatively high cost of doing business and Oracle's desire to be on the mainland, where the lion's share of its greater China customers reside.

'Hong Kong is not on the mainland, and we wanted to be where the action is,' he said.

Oracle has long been bullish towards its prospects on the mainland, but has recently been less enthusiastic about Hong Kong. In an interview last year, chief financial officer Jeff Henley said sales had slowed drastically in Hong Kong, leaving it 'in a very difficult position'.

Mr Williams played down the significance of choosing Shenzhen over Hong Kong, saying the development centre would make products specifically for the mainland, so Hong Kong was not a logical choice, regardless of cost.

The China market, excluding Hong Kong, ranked third behind Japan and South Korea for Oracle's licence revenues, but China is expected to take over the second spot within two years.

Asia accounted for about 20 per cent of the company's revenue last year. Globally, Oracle reported net income of US$2.5 billion on sales of US$10.8 billion.

The company, which bills itself as the world's largest enterprise software firm, is second only to rival Microsoft in overall size.

The new development centre will be a 1,000 square metre facility in the Shenzhen High-Tech Industrial Park. It will focus on creating products for the banking and manufacturing sectors.

Telecommunications will also be a big part of the project. The mainland has the largest mobile network in the world.

Mr Williams said Oracle would open a validation laboratory for third-generation phone services. The new organisation, which would initially be based in the Shenzhen Centre, would develop parts of the Oracle9i AS mobile application studio. Other labs would be created elsewhere in China to test mobile devices and a special team would be assembled to look at ways to expand China's telecom network infrastructure.

Oracle officials would not comment on the dollar value of the investment, but said it was a significant indication of the company's commitment to China.

There had been speculation that Oracle planned to move more of its operations into China at the expense of existing research facilities in India, where it presently employs 2,000 people.

However, Mr Williams denied that was the case, saying Oracle would expand its presence in India as well and that research there was generic, rather than market-specific.

Oracle presently employs about 350 people in China.

Mr Williams said it was important for Oracle to develop products specifically for China's developing economy.

He also said that Oracle had considered opening the centre for some time and that China's entry into the World Trade Organisation provided the firm with a good opportunity to make the move.

'We will develop Internet-based products and services... which will allow [our Chinese customers] to quickly deploy cutting-edge technology and at... lower operating costs.'