The manicured lawns, wooded hillsides and turreted towers of the Neusoft Institute of ­Information are so reminiscent of a Disney film that it would not surprise you if Cinderella emerged from the round grey brick building in its centre.

Hundreds of young Chinese students swarm across the campus to move between classes in graphic design, computer science, Japanese or English. Everything looks so clean and well ­ordered that it’s hard to believe this is a university in China.

The private university is funded by computer technology company Neusoft, which in recent years has also become China’s largest outsourcing company. It has chosen the northeastern Chinese city of Dalian as its base. Unlike most of the country’s cities, Dalian really works. The air is breathable, there are plenty of parks, there is so little traffic that it is only a 20-minute drive from the airport into the centre of town, rents are low and thousands of bright young graduates emerge from the city’s 22 universities every year.

“When I’ve been away, I love getting back to Dalian. It’s clean and green and the citizens take a real pride in the place. They don’t throw rubbish,” says Sam Chambers, who moved to the northeastern city from Hong Kong and set up the consulting company Asia Scribbler.

Fifteen years ago, Dalian was much like many rustbelt northeastern cities, weighed down with moribund state-owned factories producing goods no-one wanted to buy anymore. Then, in 1993, Dalian got a new mayor, Bo Xilai (see box below), who had a vision for the future that few would have believed possible. He wanted to turn the city into a software development hub that would be attractive to talent from across the globe.

In just over a decade, Dalian has become the Bangalore of north Asia, handling everything from call centres to secure computer systems and back-office operations for Japanese and Korean companies. The city now ranks as the fifth largest for computer outsourcing in the world, according to International Data Corp.

Dalian’s colonial history partially explains its openness to outside influence. The city was first a Russian colony and then run by the Japanese from 1905 to 1945. It was the Japanese who were the first foreign investors to arrive in force 50 years later. “Lots of people from Japanese head offices don’t like to travel but they don’t mind coming to Dalian ­because it is safe, it’s a short trip and the food is to Japanese taste,” says Tomoharu Kiyonari, managing director at NTT Data, which bought a 60 per cent stake in Panasonic’s mobile phone company last year. Panasonic was the first Japanese company to set up shop in the Dalian Software Park in 1998 and since then 430 firms have come to the park to do business.

The bitter legacy of the Japanese occupation of northeast China, then known as Manchuria, during the Second World War has left a legacy of anti-Japanese feeling in many Chinese cities. But, loosely speaking, in Dalian the anti-Japanese sentiment is not so strong and lots of Chinese people speak Japanese. That’s because most businesses here are trading with the Japanese market and a quarter of all non-Chinese companies in the city are Japanese.

“Two-thirds of China’s outsourcing market serves the Japanese market but Chinese firms want to expand to the US and European market,” says Yue Xuefeng, corporate planning manager at Dalian Hi-Think Computer Technology, one of biggest outsourcing firms in the city.

While Bangalore and Mumbai can capitalise on having lots of English speakers, in Dalian the outsourcing business centres on solving computer problems rather than answering queries about lost credit cards. “Japanese is not a mother-tongue for most Chinese. So most of the people who work for us are bilingual university graduates with high-level computer skills. It wouldn’t be cost effective for Japanese companies to run simple call centres here [using such highly qualified graduates] so the business is more hi-tech than what you would see in India,” says Mr Yue.

Hi-Think, which began running an outsourcing centre with Japan’s NEC in 1998, now runs offshore services for ­Hitachi, NTT Data and other clients ranging from Japanese schools, banks, and government departments, to the Uzbekistan National Railway Company.

Many Chinese cities have business parks with preferential tax policies but what differentiates Dalian is a local government that is set up to attract foreign business, with the mayor and other officials leading biannual trips to Japan to drum up business and develop an awareness of what foreign companies are looking for. “Companies here know that you have to build pleasant offices, plant trees and make room for green space or you will not attract top talent from overseas,” says Mr Yue.

Dr Jeff Zhu, who previously lived in the US for 18 years and worked for Microsoft before heading back to China, now works for Neusoft in Dalian. He is one of the many expats who have been lured by the city’s many charms.

“I went to many Chinese cities when I decided to come back to China – Beijing, Shanghai, Shenyang – but when I got to Dalian, oh boy, it was a big surprise,” he says. The dynamism of the local businesses, the clean air and the great seafood were all a big draw for him. Situated on the Bohai Gulf, Dalian has a much milder climate than the rest of northeastern China and a cuisine that is influenced by Japan and Korea with fresh seafood, and lots of salads and warming winter stews cooked with soy and ginger.

Dr Zhu now runs the International Software and Services division at ­Neusoft, which has grown from 6,300 people in 2005 to 15,000 today, which means as well as being Dalian’s biggest IT firm, it’s China’s largest outsourcing company. Computer companies are not the only ones to thrive in the city which is a deepwater port with a large shipbuilding industry, and is fast drawing entrepreneurs who want a base in China that is clean and convenient but has easy access to Beijing and Shanghai.

Frédéric Choux, a wine importer who moved to Dalian in 2004, chose the city because he wanted to build a ­business at his own pace in a smaller city without having to fight for market share in Beijing or Shanghai. Now, DCT wines, which he set up with his wife Barbara, is one of the biggest importers of French wines in China, supplying the growing domestic wine market as well as the likes of President Sarkozy and other French dignitaries who visit the Chinese capital.

Now 40 per cent of his business is in Shanghai, a third in Beijing and the ­remainder in Dalian and other cities, but, he professes, he would not want to relocate elsewhere. “Dalian is out of the craziness in Beijing and Shanghai. I go to those cities to meet people and I come back here to get work done,” he says. Dalian’s consumers have become more sophisticated over the last few years, ­according to Choux.

A few blocks away is the Riviera Restaurant, Dalian’s first European restaurant that isn’t inside a five-star hotel and catering to foreign tastes. The owner Jennifer Prescott says that on Valentine’s Day most of the couples dining at the restaurant, which serves Mediterranean cuisine, are Chinese. A Russian maitre d’ takes guests’ coats while a Chinese woman mixes cocktails at the bar. Behind a wooden screen, diners sit under huge marble lights imported from Spain, but the place has just enough gilt and bling to appeal to Chinese customers who have a taste for glitz.

“Lots of people said a restaurant like this wouldn’t work here but they are just followers,” says the Australian restaurateur, who sources many of her ingredients from neighbouring Shandong province. “You have to create your own benchmark for excellence,” she says.