BEIJING - A Chinese city with one of the nation's highest rates of AIDS has opened a government-funded gay bar in an outreach effort that has stirred debate over the use of taxpayers' money.

The health department in Dali, a picturesque city on a lake in southwestern Yunnan province, funded the bar to reach out to China's increasingly open gay community. Dali is one of the 10 cities in China most affected by AIDS.

Same-sex transmission accounts for about one-third of new HIV infections in China, the minister of health said this month.

"Some readers think that it's a waste of taxpayer money, or an indirect endorsement of homosexual behavior," the Beijing News said in an opinion piece on Monday, citing letters to the editor after it ran an article on the bar over the weekend.

"They think if there were another way to reach out to the gay community, it wouldn't be necessary to open a bar."

Founder Zhang Jianbo hopes that the bar will be a public gathering place for gay men, especially from rural villages, who used to gather in a patch of woods near the historic town.

The bar offers sex education and free condoms, in addition to companionship, Zhang said in an interview with the newspaper.

Though funded by the government, the bar is staffed by volunteers from a local non-government organization that works to prevent AIDS.

"Each year, the Dali city government spends 20,000 yuan ($2,929) on treatment drugs for AIDS. So if our bar succeeds in reducing transmission, our 120,000 yuan will be well-spend," Jiang Anmin, deputy director of health in Dali, told the paper.

China's gay community for decades lived in fear of discrimination and prejudice, with the earliest gay bars often the targets of police raids and closures while homosexuals often married women to avoid family and social pressures.

China now has about 100,000 known AIDS cases, but some health experts worry that HIV could spread easily among migrant workers and other hard-to-reach sectors. The government has switched to a strategy of outreach to the gay community, as part of efforts over the past few years to fight the spread of HIV.

"In the past the government relied on NGOs to reach out to the gay community," Bing Lan, director of outreach organization Aibai, told Reuters.

"Now there's a change, in that some local health bureaus feel they are able to reach out to the community themselves."

But one unintended consequence of outreach efforts in parks, bars and bathhouses frequented by gay men, Bing said, is that some gay men now avoid those haunts for fear of being found out.

"Today I saw a blog, saying that when the bar in Dali has its official opening on World Aids Day, no-one will dare to go because there will be too many reporters there," he said.

($1=6.827 Yuan)