BEIJING: Chinese officials have followed through on a threat to blow up a hydro-electric dam built by an Australian-Chinese family in north-east China. But the officials have also pledged to pay the family compensation, following a report this month in the Herald.

The Herald reported that the threats began after the family declined an approach from the head of the provincial water resources bureau, Shi Huiyun, to give him a stake in the project.

Chris Lin yesterday told the Herald that the dam has now been partly demolished, but the local Xinbin County had now agreed to compensate them for 28 million yuan ($4.7 million) in losses to date.

''The payment is to be in instalments stretching out to 2011,'' he said. ''Anything could happen during that time, so we're not very confident that we'll get the whole amount.''

Mr Lin said the county government had agreed to negotiate following September 14's report in the Herald.

He said he and his parents, Oscar Lin and Lily Wang, had rejected the Government's offer of two loss-making and over-staffed state-owned dams.

''Shi Huiyun is still there and we could still run into trouble, so we're not going to invest in Xinbin again,'' he said.

Yesterday the national Ministry of Water Resources replied to questions asked by the Herald on Monday last week.

Xu Dezhi, an official with the ministry's hydropower bureau, said the Lin family's project was stopped because it lacked approval to be established at its present location, at the foot of the world's largest water diversion tunnel.

''After consulting with the [Liaoning] provincial and city offices of the water resources ministry, the actual site for the Lins' dam is only 305 metres away from the outlet for Dahuofang water diversion project, when it was supposed to be 4930 metres away, according to the planning papers,'' Mr Xu said.

Last week Mr Lin told the Herald they had received all necessary approvals for the dam, despite Mr Shi's repeated efforts to raise technical objections. The Herald viewed what appeared to be the relevant documents and heard a recording of Mr Shi, the provincial water chief, asking the Lins to ''co-operate'' in order to provide benefits to his staff.

Before last week's report, the Herald asked Mr Shi about his family's extensive local business interests and business methods. He said he was not personally involved in any business dealings. Yesterday he said he did not want to be asked further questions.