China's vaccine, manufactured by the Chengdu Institute of Biological Products, has received WHO prequalification clearance, which means it meets global standards for quality, safety and efficacy, state-run China Daily reported.
"This is a welcome development, both in the fight to protect children in developing countries from the virus and in the future availability of vaccines more generally, as China is now producing vaccines up to WHO standards," WHO chief Margaret Chan said.
"There is a huge potential for vaccine manufacture in China and we hope to see more Chinese vaccines get WHO prequalification. The whole world will benefit," she said.
India has now developed its own vaccine that is being used to combat the deadly virus.
The annual volume of exports to India stood at 30 million doses, Shen Qi, deputy director of the Institute for Biological Product Control of the National Institutes for Food and Drug Control, told the Chinese media.
The GAVI Alliance, a public-private global health partnership committed to saving children and increasing access to immunisation in poor countries, said it is preparing to make funding available for the vaccine approved by the WHO.
The GAVI Alliance brings together governments, WHO, UNICEF, the World Bank, vaccine industries in industrialised and developing countries, research and technical agencies and civil societies, the Bill and Melinda Gates Foundation and other private philanthropists.
Eligible countries whose children are at risk of Japanese encephalitis can apply for support, and Cambodia and Laos are expected to be among the first to submit applications.
Japanese encephalitis is a vicious illness that strikes quickly and usually has a devastating impact on children and their families, Berkley said.
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