The $120 million Hangzhou manufacturing plant of pharmaceutical company MSD (known as Merck in the US and Canada) started operation Tuesday. The plant will serve as a production base not only for China, but also for other Asia Pacific countries and regions.

This is the third MSD plant in China, with one in Shanghai and another in Hangzhou. But all the production lines in the old Hangzhou factory will be moved to the new plant by the end of this year.

The new MSD Hangzhou plant is a jointly invested project with East China Pharmaceutical Group, with MSD having 85 percent and its Chinese partner 15 percent.

Pharmaceutical companies have been upping the ante in China in order to gain a share of the huge market prompted by the government's healthcare reform. MSD built its Asia Headquarters and a research center in Beijing in 2011, and said that it would invest $1.5 billion in R&D in China over the following five years.

The R&D-based Pharmaceutical Association Committee, which represents over 30 international pharma companies in China, told the Global Times Tuesday that its member companies will invest 24 billion yuan ($3.88 billion) in R&D in China over the next three years.

No longer content with mere exports, many international pharmaceutical firms have turned to joint ventures and mergers and acquisitions as a major way to expand in China, said Xu Lingni, an industry analyst at CIC Industry Research Center.

"The government also needs to tighten supervision on environmental protection while introducing investment," Xu  told the Global Times Tuesday.

Pam Cheng, president of MSD China, told reporters that the new plant is adopting strict environmental compliance standards, and vows that the plant will not pollute.

MSD built a joint venture with Jiangsu-based Simcere Pharmaceutical Group in 2012. The US pharmaceutical giant Pfizer set up a joint venture in the same year with Zhejiang Hisun Pharmaceutical.

GE Healthcare also built an innovation center in Chengdu in 2012, and moved its global X-ray headquarters to China in 2011.

MSD's new plant is located in Hangzhou's high-tech park. Wang Yongfang, an official from the high-tech park committee, said that over 60 bio-pharmaceutical companies have built facilities there.

Other cities such as Tianjin and Chengdu have seen many pharmaceutical companies build facilities recently.