Apparently, blood plasma collectors paid remote villagers to sell their blood, which was thought to be "clean"; local officials received money, so they propagandized for the racket.
One way to collect only some parts of blood, such as the plasma, is to centrifuge the whole blood and return the unwanted parts back to the donor; this allows a donor to give blood more often, although it is riskier for the donor. Chinese blood collectors may have pooled the blood or simply reused needles and other equipment. Since they mostly collected plasma and not red blood cells, people could sell quite frequently (every week?) without getting tired.
Unfortunately, many of the poor folk did not know how HIV, hepatitis, or other blood-borne viruses are transmitted, so they did not know how they got their disease or even what disease they had. The Chicom government did not care and even tried to suppress information.
Beijing had a scare last year where poor farmers, desperate over the government indifference toward their province's AIDS situation, came to the capital and stuck innocent people with needles supposedly containing HIV-infected blood. After the crimes made headlines for a few days, the government blocked all mention of them.