"In Heishan county, Liaoning province, the epidemic is still serious," Agriculture Minister Du Qingling told the China News Service, two weeks after poultry started dying from the bird flu there.
"Efforts to wipe out the disease have been very difficult and the prevention work is arduous."
Over six million chickens, ducks and geese have been culled in the province since the outbreak, which was officially reported to the World Health Organisation on November 3.
Du slammed producers of low-quality vaccines that were being sold in Liaoning, saying such products could ruin government efforts to eradicate the H5N1 bird flu virus.
"The use of fake and shoddy vaccines will result in a disaster," Du said.
"If the vaccines are not up to standard, then immunization to the virus will not be uniform or effective. This could bring huge losses."
Farms in the region were highly concentrated, he said, meaning that any problems in vaccinating poultry could result in the epidemic spreading.
"If we miss the chance to exterminate the virus in the early stages, then the difficulty in wiping it out will increase by several times as will the spread of the epidemic," Du said.
"We must fully recognize that at present there is a possibility that the epidemic will spread and expand. This is not an exaggeration just to scare people."
Health authorities fear the bird flu could kill millions of people worldwide if the virus increases its capacity to jump the species barrier from birds to humans, and becomes an easily transmissible human flu.
The bird flu has killed more than 60 people in Southeast Asia since 2003.
Although no human cases of the bird flu have been documented in China, the World Health Organization is currently investigating whether three Chinese, one of whom has died, caught the disease in central Hunan province last month.
Du said the three outbreaks other than Liaoning —— in Hunan, Inner Mongolia and Anhui —— were all under control, describing the situations there as "rather good."
The government has allocated 10 million dollars to fight the disease in Liaoning and ordered police and the military to help in the cull.
