QIANDAO LAKE is a well- known tourist destination in Zhejiang province on the eastern coast of China. Qiandao means 'a thousand islands' and the lake, ringed by hills, is in fact a reservoir built in the 1960s, which until recently was popular for boating trips.

Over the past three weeks, however, it has become notorious as the site of the 'Qiandao incident', a mass murder and alleged cover-up that is seriously undermining China's relations with Taiwan.

Amid claims that People's Liberation Army soldiers were involved, the Chinese government insisted that the brutal deaths on 31 March of 24 Taiwanese tourists on a pleasure boat were 'an accident'. Grieving relatives were refused access to the scene, and the bodies of the victims were cremated against the families' wishes. Last Sunday three civilians were arrested for 'murder, robbery and arson', but Peking has yet to provide Taipei with a full account of the killings.

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According to the initial Chinese reports on the deaths, the 24 tourists and eight mainland crew and guides on the Hairui pleasure boat were the victims of an accidental fire.

An official in Zhejiang said initial investigations pointed to an explosion on the vessel; deaths had been caused by fire or drowning; there was no evidence of robbery and there had been 'no abnormal wounds'.

But the details of the affair soon cast doubt on this account. The reservoir is not large, and some survivors might have been expected to swim to safety. Then it emerged that the bodies of all 32 people had been found in a small cabin on the bottom deck, where passengers are not supposed to go.

The Chinese imposed what amounted to a news blackout on the incident, Taiwanese journalists were banned from reporting it, and Taiwan's semi- official Straits Exchange Foundation (SEF), which deals with mainland affairs, was not permitted to send a representative to help the relatives.

In Taipei, a wave of public protests and petitions called for sanctions. The Taiwanese government's reponse was to impose a ban on cultural and educational exchanges, with the threat of a complete ban on group tours to the mainland from 1 May unless Peking provided a full account.

In the meantime, a voluntary boycott is under way, with the agreement of the Taiwanese tour operators, and thousands of airline bookings have been cancelled.

Taiwan's Economics Ministry has proposed a hold on new investment projects in China, and President Lee Teng-hui has ordered a publicity campaign to rally international pressure on China to reveal the facts.

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The mainland's Association for Relations across the Taiwan Straits (Arats), declared that the boat fire was 'merely a sudden accident, and should not impede the development of the relations'.

But on 16 April, Taiwanese intelligence reports were quoted as claiming that the boat had been attacked by a group of renegade Chinese soldiers armed with flame-throwers. The tourists and the eight mainlanders had been robbed and burned to death, they said.

According to these sources, the Chinese discovered the murders the following day, but covered up the crime and ordered the stolen goods to be returned because 'the impact of the incident could be far-reaching'.

Under mounting pressure, on 17 April the Chinese authorities admitted for the first time that the 'accident' was after all a case of 'murder, robbery and arson'. The official Xinhua news agency said three men had been arrested; two of them were involved in the motor-boat business, and the third was unemployed.

'Originally, the suspects intended to rob the tourists and then flee,' said Wang Weiyu, at the Taiwan Affairs office in Zhejiang. 'But one of them knew the boat's skipper, and they were afraid he would report them to the police. So they drove all those on board down to the small cabin on the bottom deck, killed them and set the boat on fire with gasoline.' There was nothing to implicate the military or police, he added.

The three weeks of obfuscation on the Chinese side has left the Taiwanese furious. Lee Ching Ping, the SEF's deputy secretary general, told the Independent on Sunday last week that China had still not provided any details of the three suspects, their motives or what weapons they had used.

Relatives wanted to bring the bodies back to Taiwan for burial, but they were cremated by the Chinese. Mr Lee said families had not been allowed to see the boat, had been forbidden to take photographs and at times had been kept under house arrest.

The threats of Taiwanese retaliation are not idle. About 1.5 million visits from Taiwan to the mainland are made every year, including 300,000 tourist trips. Even according to mainland estimates, these visitors spent about dollars 600 ( pounds 400) a head last year. Taiwan businessmen also account for a large proportion of the massive foreign investment in China, particularly on the east coast.

Last week, the SEF faxed a letter to Arats, calling for a meeting of the two organisations in Hong Kong from 27 to 30 April to discuss the Qiandao murders, the safety of Taiwanese tourists in China and protection of Taiwanese business interests on the mainland. To date, there has been no reply.