THE Director of the National Health Education Institute, Chen Bingzhong, has been relieved of his duties following a controversy over the institute's attempts to raise AIDS awareness, particularly among homosexuals, a well-placed Chinese source said. While replacing Mr Chen, who has served as the institute's director since 1989, the Health Ministry also served notice that the Government would not be involved in AIDS education ventures aimed at homosexuals or prostitutes. Mr Chen had earlier offered to resign after the Health Ministry began a clampdown on the institute's AIDS hotline three months ago. Last May, the Communist Party committee of the ministry, which is in charge of the institute, sacked Wan Yanhai, the hotline's 30-year-old chief, because he allegedly ''encouraged rather than opposed homosexuality and promoted the concept of human rights''. The authorities also closed down Men's World, a club run by hotline staff aimed at promoting AIDS awareness among gay men. Health Ministry officials criticised articles written by Mr Wan which offended government sensitivities by referring to prostitutes as ''sex workers'' and expressing sympathy for them. The National Press and Publications Administration called for an investigation into the publications and for a halt to the printing of such articles, the source said. However, Mr Chen, who supported the AIDS hotline, refused to admit his staff had made any error in the publications. In an article being printed in the August edition of the China Health Education journal, published by the institute, Mr Chen maintains that society should not discriminate against gays, because that will force them further underground and make it harder to prevent AIDS. Health Ministry officials said they were not aware that Mr Chen had been dismissed - a common official response about decisions which have not been officially announced. In what appears to be a setback for attempts to promote AIDS awareness, the ministry has adopted a conservative stance on educating high risk groups. According to the source, Health Minister Chen Minzhang said recently that while homosexuality was linked to the AIDS virus in the United States and Europe, that was not the case in China, where a large percentage of the AIDS cases involved use of contaminated needles in taking narcotics. The minister said that it was not proper for a new class of people to be created because of AIDS, and that China should not use the viewpoints of sociologists in tackling the disease. The Chinese source said that Mr Chen seemed to be calm about his removal, feeling that now was not an opportune time to promote AIDS awareness, at least in the way his institute had attempted to do so. Mr Chen, who turned 60 last month, was due for retirement. The Beijing AIDS hotline has already been reduced to a staff of one or two volunteers operating one afternoon a week, and appears set to close down next week.