Blood-selling schemes are blamed for helping spread the HIV/Aids virus in China in the 1990s, especially in rural areas where many poor Chinese became infected.
Operators used dirty needles, and people selling blood plasma were replenished from a pooled blood supply that was contaminated with HIV.
The Chinese government and the United Nations say China's tainted blood problem had been largely brought under control.
Last year, only about 5 per cent of new reported HIV infections were blamed on tainted transfusions or on blood-selling, which has been banned, the health ministry says.
The Xinhua report said the blood-selling plan was first exposed by the Chinese newspaper Information Times in a report on Wednesday.
The report said blood sellers numbered in the hundreds, and the scheme brought in thousands of US dollars each month.
It said sellers took medication that allowed them to sell blood frequently, with some selling their blood as many as 16 times a month.