We don't yet know. But read this collection of links. Here is the most worrying excerpt:
Reports coming out of Qinghai suggest H5N1 infections in humans and birds are out of control, with birds distributing H5N1 to the north and west, while people are being cremated and told to keep quiet.
Reports from Chinese language papers detail over 200 suspected infections in over two dozen locations in Qinghai Province. In the most affected 18 regions, there are 121 deaths, generating a case fatality rate above 60%.
Even if only a small fraction of the deaths are H5N1 linked, the cases would move the bird flu pandemic stage from 5 to the final stage 6, representing sustained human-to-human transmission of H5N1.
The high case fatality rate suggests the H5N1 in Qinghai has achieved efficient human transmission while retaining a high case fatality rate. If confirmed, these data would have major pandemic preparedness implications. These cases began almost a month ago and are now spreading via people who have previously entered the high risk area.
The official media comments coming out of China appear to be carefully worded, describing "new cases" being brought under control, inability to "see" human cases, or lack of "pneumonia" cases.
Several reports from Qinghai have cited limitations on discussing or reporting details. All nature reserves in China have been closed.
By the way, the Chinese claim to have a fully effective vaccine. Since I don't believe them, I find this especially worrying.