The suspects include Huang, deputy chief of a blood centre run by Lanzhou Institute of Biological Products in Gansu province, and six unemployed men.
The company is one of China's largest producer of blood products.
Huang said he offered 50 yuan (about USD 8) in cash to first-time donors at the centre, state-run Xinhua news agency reported.
Encouraged by the prospects of the reward, Huang's friend Zhang and some other people known to him took primary and secondary school students to the centre by force and pocketed the money themselves, according to an unnamed official with the public security bureau in Liangzhou District of Wuwei.
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The gang earned an illegal income of 6,250 yuan.
The suspects always presented false ID cards at the centre, pretending the donors were adults, he said.
The children were beaten if they did not cooperate and the scam was uncovered when one boy sought his parents' help after being beaten. His parents said he looked sick and pale.