The research and development (R&D) process of Chinese medicine, with one notable feature, clinical application based, is significantly different from which of chemical and biological medicine, from laboratory research to clinics. Besides, compound prescription is another character. Therefore, according to different R&D theories between Chinese and Western medicine, we put forward a new strategy in drug design of Chinese medicine, which focuses on "combination-activity relationship (CAR)", taking prescription discovery, component identification and formula optimization as three key points to identify the drugs of high efficacy and low toxicity. The method of drug design of Chinese medicine includes: new prescription discovery based on clinical data and literature information, component identification based on computing and experimental research, as well as formula optimization based on system modeling. This paper puts forward the concept, research framework and techniques of drug design of Chinese medicine, which embodies the R&D model of Chinese medicine, hoping to support the drug design of Chinese medicine theoretically and technologically.