By Ben Blanchard

BEIJING, April 26 (Reuters) - China needs more money and more help to improve its health services to fight bird flu, an official said on Thursday, while the WHO said the threat of a pandemic remained a real possibility.

China has the world's largest human population and largest domestic bird population, which presents a unique risk, said Li Jianguo, deputy director-general of the health ministry's centre for public health emergencies.

"The crucial area in the fight against bird flu is in the countryside. Grass roots' medical facilities and people's knowledge about bird flu are quite weak," he told a ceremony to mark a World Bank grant of $2.65 million to fight influenza.

"China is a developing country. Although the government has invested a lot of money in the fight against bird flu and pays it great attention, we need more money and technical aid to raise preparedness, especially at the grass roots," Li said.

More than half the country's domestic poultry live in people's backyards, which experts say raises the risk of sick birds infecting humans.

While bird flu is mainly a disease in animals, experts fear it could mutate into a form that can be passed easily among people, triggering a possible pandemic.

The virus has killed 172 people worldwide since late 2003. China, with millions of backyard birds and a strained medical system, is seen as key in the fight against bird flu.

China last reported a human death from bird flu in March, of a 16-year-old boy from the rural eastern province of Anhui.

"Just because an avian influenza pandemic hasn't happened yet, or because there is lower media coverage at times about pandemic flu, does not mean the very real threat has gone away," said World Health Organisation epidemiologist Nima Asgari.

The challenge for China -- which has reported 24 human infections from the H5N1 bird flu virus, including 15 deaths, since 2003 -- was to make sure efforts at the central government level were repeated across the nation, Asgari added.

"It's now important to move those capacities to a local, provincial and county level," he said.

The World Bank hopes its funding, to be concentrated in Anhui and Liaoning provinces, will help improve detection, reporting and planning abilities, said Elaine Sun, the bank's China operations manager.

"We hope the project will contribute to the establishment of a track record of credibility through honest, accurate, timely disclosure of information concerning the disease to citizens and the outside world," she said.

"Money lost, little lost. Credibility lost, all lost," Sun added.

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