BEIJING, April 20 (Reuters) - Chinese children with AIDS, especially from rural families, are going without treatment because their families are too poor to afford it, despite a government policy of free treatment, an activist group said on Monday.

Some families don't even know AIDS treatment programmes exist, it said.

"China has made great progress in the fight against AIDS, but far too many children are getting the wrong AIDS treatment," said Sara Davis, executive director of Asia Catalyst, which issued the report.

As many as 10,000 Chinese children may be HIV-positive, most because of botched blood transfusions or transmission from their mothers. They are concentrated in central Henan province, where the blood supply was contaminated in the 1990s, or in Yunnan province in the southwest, a hub for drug trafficking.

In 2005, 9,000 cases of children contracting HIV from their mothers were reported. Many children with AIDS die before the age of five, often undiagnosed.

Some live too far from hospitals and others have been turned away from hospitals and schools that fear contagion from AIDS patients.

China guarantees free drug treatment for AIDS, but many poor families cannot afford the associated fees or treatment for other diseases which may strike the weakened children.

The government provides generic versions of four drugs for front-line treatment, but many patients have developed resistance.

Asia Catalyst called for the Chinese government to "fill in the gaps" by extending coverage for additional medical costs, and providing cheaper second-line drugs.