The investment is of course peanuts compared to the $3.4bn AstraZeneca spent last year on R&D, but the true value of this move lies in its potential for more innovative medicines for Chinese patients.
Whereas the global pharmaceutical market is growing 7 per cent annually, China's market is expanding at a rate of more than 20 per cent, as drug sales in the country could almost double to $25bn a year from $13bn in 2005.
Thus, Britain's second-biggest drugmaker is determined to boost its presence in China, its fastest growing major market with annual growth of about 30 per cent, nevertheless sales of the company in the country last year were only about $300m compared to its nearly $24bn in global sales.
The prime focus of the investment will be the establishment of an "Innovation Centre" and the company has initiated a comprehensive search for an appropriate location, hoping to have it operational by the end of 2009.
The centre will focus on translational science by developing knowledge about Chinese patients, biomarkers and genetics, while the initial therapeutic area for the Innovation Centre will be cancer, which is a major cause of death in China, the company announced.
Furtermore, AstraZeneca said it will expand its clinical research capabilities and is looking this year to increase the number of scientific collaborations with local Chinese organisations.
The company recently signed a $14m deal with Wuxi Pharmatech for Compound Collection Synthesis and has an existing collaboration with Shanghai Jiao Tong University on the genetics of schizophrenia.
"With China's rapid economic growth and increasing demand for better healthcare, China has become one of the most important emerging markets for AstraZeneca and will be important to our future success," AstraZeneca CEO David Brennan said.
"We fully support China's national focus on innovation by substantially increasing our R&D investment, both in financial terms and in terms of scientific collaboration."
Undoubtedly the drugmaker expects the Chinese authorities in return to do more to protect intellectual property and crack down on counterfeit drugs, following several reported deaths in the country this month as a result of illegal and unsafe drugs.
AstraZeneca, which now has 2,200 employees in the country, was the first multinational pharmaceutical company to include China as an area for large-scale international multi-centre trials and establish a clinical research centre there.
The drug firm has a number of eye-catching initiatives in China, including partnering with government organisations and industry associations to develop academic and management knowledge among medical professionals and hospital executives and starting several programmes on disease education and public health.