Like Tamiflu, which is made by Swiss pharmaceutical group Roche, the new medicine is a neuraminidase inhibitor that prevents the virus from spreading to other cells, but costs about a third of the price, China Daily said.

The Chinese drug was developed by a research group at the Academy of Military Medical Sciences, which could not be reached for comment about the report.

"We have completed clinical experiments, and find it is more effective on humans than Tamiflu," the newspaper quoted Li Song, a leading scientist in the academy's research group, as saying.

No details were given on whether any clinical tests had been conducted on the drug and whether it had been approved for production and sales.

The new drug will cost only a quarter to a third of the price of Tamiflu, which sells for 29.8 yuan (3.73 US dollars) per capsule in China, Li told a high-profile forum on prevention and control of avian influenza Monday.

He said the new medicine would be produced by domestic firms and stockpiled for use in the event of a bird flu pandemic.

A spokesman for the World Health Organization's China office said he had no information about the drug.

Tamiflu is acknowledged as being effective against human infections of the deadly H5N1 virus and is being stockpiled by various countries for use in case of a pandemic.

China has reported six human infections of bird flu, including two fatalities, and 31 outbreaks among poultry this year.

This month, Shanghai Pharmaceutical Group (SPG) became the first company in Asia to secure a licence from Roche to produce and sell a generic version of Tamiflu.

China has announced several breakthroughs on bird flu in recent days, but it was unclear whether the discoveries had been subjected to international scrutiny.

State media said Monday that China has developed a new, more efficient and cheaper bird flu vaccine which can also protect its massive poultry population against deadly Newcastle disease.

One billion shots are expected to be produced by the end of this month. The vaccine will be used from the beginning of next year in combination with other treatments.

China has the world's largest poultry industry, with 14 billion poultry produced a year.

Bird flu has cost the industry more than 60 billion yuan (7.5 billion dollars) in losses between October and December alone, China Daily said, citing official figures.

The bird flu virus has killed more than 70 people in Asia since 2003. It is currently spread among animals and from animals to humans. Scientists fear it could mutate to a strain easily spread between humans, causing a pandemic.

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