Carol goes to visit a big, old house and sees a statue of a Chinaman. Bella the goat eats some of the flowers and Carol has to chase her away.

Carol meets a boy called Bob who lives on a boat. Carol sees another statue Chinaman on Bob's boat and Bob says it is a clue to a lost treasure.

Miss Brown tells Bob and Carol about a rich man who long ago hid his treasure and left clues to find it written on a pair of statues.

Bob and Carol begin following the clues to find the treasure. They find a stone, cross the canal and enter a mill. But the mill is too new to be the one in the clues.

Bob and Carol realise what King's Mill is and go to investigate. Bella the goat makes trouble again by eating their map, but Bob still solves the final clues and the children discover an old piece of paper.

The children finally uncover the lost treasure. They meet a rude, fat man with a motorbike and give him back the portable radio that he drops. Miss Brown discovers that an old picture has been stolen, and then the treasure is stolen too.

Bob and Carol go up the canal and meet a man called Mike and a boy called Dan. They hear the Fat Man on the radio talking about stealing the picture and the treasure.

Bob and Dan go off to search for the "Red Dragon" while Carol overhears the Fat Man talking to Number One on the radio. Carol is locked in the boat house and has to try to get help.

Mike and the children go to Bell Park to try to catch the villains. Bob and Dan find Number One while Carol and Mike spot the Fat Man, but he runs away.

The Fat Man gets away so Mike and the children follow the Red Dragon and spot Number One. They get the police and the villains are finally caught in the locks. Bob and Carol recover the treasure and the picture.