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 Immediately after the conclusion of the second lease, the Koreans began digging an irrigation ditch or canal, several miles long, in order to divert the water of the Itung River and distribute it over this low marshy area for the purpose of making it suitable for paddy cultivation. This ditch traversed large areas of land cultivated by Chinese who were not parties to either lease transaction, since their lands lay between the river and that leased by the Koreans. In order to provide ample water supply to be deflected through this ditch to their holdings, the Koreans undertook to construct a dam across the Itung River.

After a considerable length of the irrigation ditch had been completed, the Chinese farmers whose lands were cut by the canal rose up en masse and protested to the Wanpaoshan authorities, begging them to intervene in their behalf. As a result, the Chinese local authorities despatched police to the spot and ordered the Koreans to stop excavation work at once and to vacate the area. At the same time, the Japanese Consul at Changchun sent consular police to protect the Koreans. Local negotiations between the Japanese and Chinese representatives failed to solve the problem. Somewhat later, both sides sent additional police, with resulting protests, counter-statements and attempted negotiations.

On June 8th, both sides agreed to withdraw their police forces and to conduct a joint investigation of the situation at Wanpaoshan. This investigation revealed the fact that the original lease contained a clause providing that the entire contract would be "null and void" if it should not be approved by the Chinese District Magistrate, and that this approval was never given.

The joint investigators, however, apparently failed to agree upon their findings, the Chinese maintaining that the digging of the irrigation ditch could not fail to violate the rights of the Chinese farmers whose lands were cut by it and the Japanese insisting that the Koreans should be permitted to continue their work, since it would be unfair to eject them on account of the error in the lease procedure for which they were in no way at fault. Shortly thereafter, the Koreans, assisted by Japanese consular police, continued to dig the ditch.

Out of this train of circumstances came the incident of July 1st, when a party of 400 Chinese farmers whose lands were cut by the irrigation ditch, armed with agricultural implements and pikes, drove the Koreans away and filled in much of the ditch. The Japanese consular police thereupon opened rifle fire to disperse the mob and to protect the Koreans, but there were no casualties. The Chinese farmers withdrew and the Japanese police remained on the spot until the Koreans completed the ditch and the dam across the Itung River.

After the incident of July 1st, the Chinese municipal authorities continued to protest to the Japanese Consul at Changchun against the action of the Japanese consular police and of the Koreans.

Far more serious than the Wanpaoshan affair was the reaction to this dispute in Chosen (Korea). In consequence of sensational accounts of the situation at Wanpaoshan, especially of the events of July 1st, which were printed in the Japanese and Korean Press, a series of anti-Chinese riots occurred throughout Korea. These riots began at Jinsen on July 3rd, and spread rapidly to other cities.

The Chinese state, on the basis of their official reports, that 127 Chinese were massacred and 393 wounded, and that Chinese property to the value of 2,500,000 Yen was destroyed. They claim, moreover, that the Japanese authorities in Korea were in large measure responsible for the results of these riots, since, it was alleged, they took no adequate steps to prevent them and did not suppress them until great loss of Chinese life and property had resulted. The Japanese and Korean newspapers were not prevented from publishing sensational and incorrect accounts of the Wanpaoshan incident