WuXi was honoured with the 2006 Merck & Co. 'Outstanding Strategic Collaboration Award' in recognition of its "contribution to Merck's custom medicinal chemistry and process research chemistry and commitment to develop and grow capabilities to meet Merck's business needs," said the chemicals giant in a statement.
Merck said WuXi was one of only twelve companies selected from thousands of its suppliers to receive a formal recognition at its annual Supplier Recognition Forum.
The Shanghai-based company also has lucrative deals in place with large international firms such as Novartis and AstraZeneca.
The award is an encouraging sign for the Chinese government which has actively been implementing plans to consolidate the Chinese outsourcing industry in an effort to capture business from other developing countries such as India.
Intrinsic advantages that China offers such as lower wages need to be combined with financial and logistical improvements in other areas if the People's Republic is to capitalise fully on its potential as a major outsourcing hub.
In order to combat the fragmentation seen within China's outsourcing industry, Assistant Minister of Commerce, Fu Ziying, recently outlined plans to develop 10 outsourcing base cities, starting with Shanghai, Dalian, Xi'an, Shenzhen and Chengdu.
Fu hopes the scheme will encourage multinationals to shift offshore outsourcing services to China and promote up to a 1,000 native outsourcing enterprises.
He said: "The Ministry of Commerce is to channel social resources into innovation-oriented enterprises, and support policies will focus on enterprises rather than export products."
At the same time, Chinese companies are becoming more outward looking, especially with respect to conforming to international standards.
For example, SynTheAll Pharmaceuticals, the manufacturing unit of WuXi PharmaTech, has now been recertified as International Organization for Standardization (ISO) 9001:2000 compliant.
A further boost to China's outsourcing industry has been provided by a recent lifting of a World Trade Organisation (WTO) restriction, allowing foreign banks in China to operate in local currency.
The resultant expansion of the banks networks coupled with the introduction of new services will make it easier for European and American pharmaceutical companies to outsource services to China.