The development is of particular significance because shikimic acid, Tamiflu's starting material, is obtained almost exclusively from the pods of the star anise, a fruit that is found mainly in four mountain provinces in the south west of China.
The approval means that China will not have to rely on imports in case of a bird flu pandemic, as Chinese drug companies will have the capacity and the credentials to turn shikimic acid into Tamiflu on a large scale.
Roche, which has an exclusive patent to make Tamiflu until 2016, has been under growing international pressure to ease its control on the manufacture of the drug and hand out more licences for its production, as governments and companies stockpile it to prepare for a possible influenza pandemic.
The Swiss drugmaker granted a licence for the production of Tamiflu to the Shanghai Pharmaceutical Group in December, while clinical trials since March have confirmed that domestic Tamiflu is as effective and safe as the imported version.
Crucially, the domestic version is expected to be sold at half the price of the imported one.
The manufacturing of the drug poses many challenges, since the process, which has many complicated steps, takes approximately six to eight months once all the raw materials have been sourced.
To date, Roche has accepted pandemic orders for Tamiflu from more than 65 countries worldwide, with several nations ordering enough of the drug to cover 20 percent to 40 per cent of their populations.
The Swiss drug firm has predicted sales this year for Tamiflu will reach 1.1bn to 1.2bn Swiss francs (€7bn-€7.5bn), excluding sales as a treatment for regular influenza.
Internationally, Roche will be able to produce 400 million doses a year by the end of 2006, the company expects.
According to the Chinese state news agency, the country has reported 18 cases of human infection of bird flu since last November with twelve fatalities.