Swiss pharmaceutical firm Novartis is to build a $100 million (SFr125 million) research and development centre in China, employing 400 scientists.
The investment aims to tap into the fast-growing Chinese drugs market, and to take advantage of China's cheap scientific talent.
A start-up operation is expected to open next May, and construction work should begin in July. The new centre's primary focus will be the infectious causes of cancer endemic in Asia.
"The level of scientific expertise in China is rising rapidly," said company CEO Daniel Vasella. "At the same time, the healthcare needs of the Chinese are growing, primarily the result of urbanisation, lifestyle changes and associated chronic diseases."
Specialists say that as Chinese salaries and purchasing power rise, diseases such as hypertension and diabetes are appearing along with more sedentary lifestyles and richer diets.
Sales of pharmaceuticals in China are expected to nearly double by 2010, rising from $13 billion in 2005 to $25 billion according to Boston Consultancy, an independent consulting group. The global market is worth $570 billion.
Novartis also plans to use the Shanghai centre to combine modern drug discovery with traditional Chinese medicine, a move that will require local expertise.
The Basel-based group has already used such know-how in the past. It developed its Coartem anti-malarial drug from Chinese sweet wormwood plants with partners such as the Chinese Academy of Military Medical Sciences.
In the past, Western drugmakers have been wary of making investments in China because of perceived weaknesses in patent protection. But the situation has been improving.
In June, a Chinese court upheld American group Pfizer's local patent on Viagra, overturning a 2004 decision that had deprived the company of its intellectual rights on one of its biggest sellers.
Analysts say setting up research centres in China also helps create goodwill for companies. Local authorities have a big say in what medicines are bought to treat their citizens.
Novartis already makes generic drugs for the Chinese market via its subsidiary Hexal. Other companies with a presence in China include Swiss rival Roche, as well as Britain's AstraZeneca and GlaxoSmithkline.
swissinfo with agencies
The Novartis Institutes for BioMedical Research are Novartis' global research organisation.
The institutes are headquartered in Cambridge, Massachusetts, with a major research facility in Basel, Switzerland.
Other key research sites are currently located in Horsham, Britain; Vienna, Austria; Tsukuba, Japan; East Hanover, New Jersey.
Novartis' corporate research division oversees three other institutes: The Genomics Institute of the Novartis Research Foundation in La Jolla, California; the Novartis Institute for Tropical Diseases in Singapore; and the Friedrich Miescher Institute in Basel.
Novartis expects double-digit growth in its China sales for the coming years.
Over the past five years, growth has been 20 per cent, but is roughly ten per cent in 2006.
China should become one of the company's top ten markets by 2010.
Novartis produces most of the drugs it sells in China locally.