The main purpose of this thesis is to study the location advantages of the “Dalian economical and technological development area” of China.We found out why JME went to Dalian and how they performed there as a result,and studied the changes over the past 25 years.Before 1995,they considered the infrastructures and convenience of the location to export the most important,because they mainly produced items for exporting overseas and there were few local suppliers.In addition,invitation policies set by the local government was considered important.In 1984,the Dalian city government introduced an industrial policy through which they attempted to invite JME to come and invest in Dalian.For example,they built the first industrial park in China in corporations with Japanese government and companies.The mayor of the city met CEO of the JME in person and encouraged them to invest in Dalian.Also,the city assisted JME in processing application and dealt with problems JME confronted.In those days,it was unusual for a communist country like China to act in such ways.As a result many JME came to invest in Dalian.Moreover,there were social and historical factors that attracted JME to Dalian.For example,local people were friendly toward Japanese unlike in other cities in China,Japanese was a popular language to study,and there was a close historical relation between Dalian and Japan.After 1996,however,since development areas such as Dalian had been constructed in many parts of the country,preferred tax policies and infrastructures have become not so attractive for JME.In addition,local government in other cities started introducing encouragement policies for JME.In recent times,production and sales costs factors are considered important by JME.Most of JME that went to Dalian were large in size and successful,and many of their suppliers followed them to Dalian.After having seen the success of these large companies,many other JME also decided to go out to Dalian.After having come to Dalian,many JME highly valued the local employees especially in the office administration and corporation from the local government in solving the problems JME faced.None of manufacturing companies considered moving their factories to inland rural areas of the countries,though,most large companies set up other supporting factories which produced the same products in third countries.This indicates that most of the large companies aim to reduce political and social risk,which occurs from the concentration of their factories rather than acquiring scale merit.In conclusion,industrial cluster has been built and maintained in Dalian as a result of construction of infrastructure,encouragement by local government and so on,in spite of the problems such as high transporting cost and the luck of suppliers.