To support its expansion efforts in the Dutch market, Chengdu Diao chose to work with a local pharmaceutical company to promote its products in hospitals and pharmacies.

In terms of expanding the domestic market share, Li says the company is stressing the differences between today's living conditions in China and those of the past, as well as the differences between Chinese people and those in other countries. In this way, the company can distinguish market segments. The company has conducted research to understand these differences, and it's also accounting for lifestyles and dietary habits.

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With China becoming more affluent, living habits normally associated with type II diabetes, such as being overweight, exercising less, rich diets and sugary drinks, have become more common. Environmental pollution is also contributing to the growing incidence of cancer.

Given these circumstances, Li says the company will continue to invest in medical research and development in the fields of cancer and diabetes to catch up with more established foreign rivals in the country.

"In comparison with many products of multinational companies, our specialty involves putting helpful TCM elements into medicine to improve the cure rate," says Li.

With four pharmaceutical plants and 9,000 employees, including 1,780 research staff in Sichuan province, Chengdu Diao's revenue grew 5 percent last year to 2 billion yuan ($322 million). The company invested 80 million yuan in R&D last year.

Medical research and clinical trials for new drugs are expensive processes, so Li began to diversify the company's business operations by venturing into the coal and nonferrous metal mining businesses in the past decade. The company also got involved in the real estate business in Chengdu to support different projects carried out by its medical research departments, collaborative institutions and universities.

To prevent soil contamination, avoid excessive use of pesticide and ensure product quality, Chengdu Diao established a number of raw material planting bases for TCM production in provinces such as Yunnan and Sichuan, as well as China's Northeast region. Its biggest planting base is in Luoning county of Central China's Henan province, where it uses 330 hectares of land to raise medicinal materials to meet the market demand.