The arrested are the deputy chief of a blood centre operated by a company in Gansu province, whose surname was given as Huang, and six jobless men, the official Xinhua news agency reported late Friday.
The company, Lanzhou Institute of Biological Products in the city of Wuwei, is one of the country's biggest producers of blood products, the report said.
According to the report, a friend of Huang's surnamed Zhang and some of Zhang's friends forced primary and secondary school children to go to the centre to donate blood, Xinhua said, citing an unnamed official with the public security bureau in Wuwei's Liangzhou District.
Blood can legally be donated in China from the ages of 18 to 55, Xinhua said.
At least eight pupils, who ranged in age from 10 to 16, were compelled to donate blood at least once a month for seven months, the official said, with the group taking in 6,250 yuan (33,000 baht).
The suspects would use false identification cards at the centre to pretend that the donors were adults, the official said.
A duty officer at the public security bureau in Wuwei's Liangzhou district reached by AFP on Saturday would provide no confirmation or details.
China National Radio quoted Li Yongming, a propaganda official with the Wuwei police, as saying that both the number of children and the monetary amount involved could increase.
Blood centres in China must double-check a donor's identity before taking blood, the report said.
Huang, the centre's deputy chief, told police he was under pressure to increase the number of donors and sought Zhang's help, Xinhua said.
The gang beat the children to make them cooperate and the scandal came to light when one of the them sought assistance from his parents, the report said.