By Sybille de La Hamaide

PARIS, Jan 7 (Reuters) - China should focus on financial compensation for farmers who report new bird flu cases if it wants to stamp out the disease that killed a 19-year-old woman this week, the World Animal Health body OIE said on Wednesday.

OIE director general Bernard Vallat said many farmers hesitate to report bird flu cases for fear that they will not be properly indemnified for the slaughter of their fowl.

China issued a bird flu alert on Wednesday when a woman died of the H5N1 virus after gutting nine ducks, which experts say highlights the role and risks of waterfowl in the transmission of the virus to humans. [ID:nPEK39026]

It is the first such death in the country in almost a year, and the 21st to date.

"China must perform millions of vaccinations so it is not surprising to see hitches in the surveillance system from time to time," Vallat told Reuters at a news conference.

"But if China wants to be sure to eradicate the disease it must have an efficient compensation system for breeders and then we could be optimistic to see the disease disappear," he added.

Vallat said that whatever measures were taken, there was little hope of seeing a full eradication of bird flu in the world as there would always be a country unable to cope with the virus.

The current financial crisis could even worsen the situation if rich countries cut their aid to developing nations or if local governments in need of cash started diverting money from budgets intended for the fight against animal diseases.

"I fear that the financing of this fight will not be a priority in the crisis that we are going through," he said at the Office International des Epizooties headquarters in Paris.

"This kind of budget is quickly biodegradable."

The H5N1 strain remains largely a disease of birds but experts fear it could change into a form that is easily transmitted among people and kill millions of people worldwide.

With the world's biggest poultry population and hundreds of millions of farmers raising birds in their backyards, China is seen as crucial in the global fight against bird flu.

Since the H5N1 virus resurfaced in Asia in 2003, it has infected 391 people, killing 247 of them, according to figures released by the World Health Organisation in mid-December. (Editing by Anthony Barker)

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