"It must be reported timely and faithfully. And anyone who intends to hide the epidemic should take responsibility and will be severely punished," Health Minister and vice premier Wu Yi told a conference on HIV/AIDS in Beijing.
The comments by Wu on Wednesday, which appeared in the China Daily, mark the first time China's leaders have threatened punishment for covering-up the deadly disease.
Her approach appeared to be based on China's experience with the SARS epidemic last year when officials only began revealing cases of Severe Acute Respiratory Syndrome after they were ordered to by the central government.
An early cover-up in reporting contributed to the disease spreading from China to more than 30 countries and killing nearly 800 people worldwide.
Following SARS, international experts have been urging Chinese officials to use the same tough approach towards HIV/AIDS -- a disease more devastating than SARS.
Wu told officials from various regions of the country attending the conference that prevention and control work on AIDS is at a vital stage.
"The epidemic is at a critical point of spreading from high-risk groups to common people," Wu said.
"We can completely contain the momentum if we take it seriously. Otherwise, we will lose this best, fleeting opportunity ... The consequences will be serious."
Wu also asked local officials to strengthen efforts in public education, fight illegal blood sales, stop in-hospital infections through unsafe blood transfusions, make condoms and clean needles available to high-risk groups and to step up surveillance and monitoring of the epidemic.
Delaying reports of epidemics will also be punished, the Xinhua news agency quoted Wu saying.
Ray Yip, director of the China-US AIDS Prevention and Care Project, echoed Wu's words, telling the conference China still has a "window of opportunity" to effectively contain the virus spreading from high-risk groups, such as drug addicts and prostitutes, to the general public.
A very difficult task in preventing the virus from spiralling upward is that nearly 90 percent of those infected do not know they have the disease, Yip reiterated.
Many officials also have no idea how many cases exist in their areas and those that do are reluctant to reveal them for fear of the economic consequences.
Moreover, about 70 percent of the people infected are in poverty-stricken areas. And nearly 80 percent of them cannot get necessary medical treatment.
Most of those infected with HIV in the mainland are among high-risk groups, including drug users, blood sellers and prostitutes.
But the disease is also spreading to other sectors of the population and is growing at a sharp rate of 30 percent a year.
The government estimates there are 840,000 people infected with HIV/AIDS, but international experts believe the total number of infections is much higher and have warned there could be 10 million cases by 2010.