Chicken samples in Shanghai were revealed last night to be infected with the H7N9 virus.
It prompted the agriculture ministry to increase checks for the deadly strain of bird flu as the city temporarily closed live poultry markets and suspended live bird sales elsewhere.
View H7N9 map  in a larger map. Click on each balloon for more information on individual patients infected with the avian flu virus: blue, patients infected with the H7N9 virus under treatment; red, those infected with H7N9 who have died; and pink, those infect with the H1N1 avian flu virus.
The news came after the disease claimed its sixth mainland victim, while tests on the first suspected case in Hong Kong proved negative.
The ministry said last night that 10 chicken samples from two markets in the Minhang district of Shanghai and at the Huhuai Farm Products Market in the adjacent Songjiang district had tested positive for H7N9.
The virus was also found in two pigeon samples and seven environmental samples collected from these markets, out of a total 738 samples tested.
More than 20,000 birds were culled yesterday at the Huhuai market, where the H7N9 virus was first detected in pigeon samples on Thursday.
The ministry also ordered the culling of birds in the two Minhang markets after the latest test results.
Shao Linchu, deputy director of Shanghai's Agricultural Commission, said: "The government will pay compensation to the vendors of at least 50 per cent of the market price of the poultry slaughtered."
Li Wenqi, a poultry farmer in the city's Xuhui district, said his business had fallen from 100 chickens a day to zero since the H7N9 outbreak, but he was still very willing to comply with the government.
"Our business is suffering but people are dying," he said. "We can only be co-operative. This is not the time to bargain with the government."
It emerged yesterday that a 64-year-old farmer from Huzhou, Zhejiang province, was confirmed to have the virus on Thursday and died that night.
Health officials in Jiangsu said that two new cases had been confirmed in the provincial capital Nanjing.
One was a 61-year-old woman, said to be in a critical condition, and the other a 79-year-old man in a serious condition.
The cases take the total number of people confirmed to have been infected in the Yangtze River Delta region to 16.
In the first suspected case in Hong Kong, the Hospital Authority said a seven-year-old girl who travelled to Shanghai at the end of last month had developed a fever and flu symptoms.
She was kept in quarantine in Queen Elizabeth Hospital's paediatric department. But officials revealed that the tests for the H7N9 strain had proved negative shortly before midnight.
Meanwhile in the city, additional staff will carry out manual temperature checks at border crossing points, starting today.
Secretary for Food and Health Dr Ko Wing-man said: "I think we ought to be prepared, mainly because of the fact that H7N9 up to this moment has created a relatively high mortality rate in infected patients.
"Secondly, the outbreak has been extending or worsening in the last two to three days in eastern China."
The Hang Seng Index ended down 2.7 per cent at 21,726.9 as H7N9 concern sparked a sell-off.
Click on each balloon for more information on individual patients infected with the avian flu virus: blue, patients infected with the H7N9 virus under treatment; red, those infected with the H7N9 who have died; and pink, those with H1N1 avian flu virus.