"The opening of this research center represents an important turning point for our company and for Asian consumers around the world," said CEO Sir Lindsay Owen-Jones.
"The knowledge and insights that we gain through research conducted at the Pudong Research Center will ultimately allow us to develop innovative new products that better service the beauty care needs of the global Asian market."
The global skin care and cosmetics company's investment in China is right on the button, if market analysts' projections are correct.
In a report published this month, Euromonitor valued the Chinese cosmetics market at $7.9 billion, with sales having almost doubled in the past five years. It expects the boom to continue for a few years more yet.
Now the eighth largest cosmetics market in the world and Asia's second largest (after Japan), China's beauty sector has rising affluence amongst consumers and better distribution channels to thank for the boom.
Western-style products carry huge cachet in China - a factor that direct sales companies Avon and Mary Kay will be banking on when the direct sales ban is lifted on December 1.
L'Oreal has been operating in China since 1996, and in fiscal year 2004 Asia was one of its most successful market, with 17 percent sales growth on the previous year to €1.269 million ($1.27 million or 12.48 million Chinese RMB).
In China, sales almost doubled - a factor attributed to both the growth of existing brands and the acquisition of Mininurse and Yue Sai. In Hong Kong, sales were up 36 percent and in Taiwan 22 percent.
When its brands from other parts of the world are coupled with formulations designed to deliver the best results from Asian hair and skin, it might see a real competitive advantage in the market.
Initially, the 3,000m² facility just outside Shanghai will concentrate on make-up, skin care and hair care. By the end of next year, however, it is planned for it to employ more than 60 staff (most hired locally) and will have expanded to house biology laboratories to focus on tissue engineering, and chemical labs to investigate the potential of botanical raw materials that are used in or inspired by traditional Chinese medicine.
The company said the move is "part of a long-term global strategy and commitment to formulate cosmetic products that meet consumer needs the world over, whilst continuing to respect cultural diversity."
As well as adapting international brands to the Chinese and Asian needs, the center will also support the internationalization of Chinese brands that fall under the L'Oreal umbrella, such as Yue-Sai.