The series is set in early 20th-century China. Chan Zan travels to Shanghai with his younger sister, Siu-yin, in search of a new life after their hometown is destroyed by a group of bandits. Upon his arrival, he sees that Shanghai is divided into an international settlement under the control of foreign powers, while the martial artists' community in Shanghai is divided into many schools competing for the top position. The status reflects the state of China: the Chinese are pursuing their individual goals and fighting among themselves instead of uniting to drive out the overbearing foreign powers and regain sovereignty of their country. Fok Yuen-gap, the founder of Ching-mou School, is trying hard to persuade and influence the other schools to unite under a common purpose of defending China from foreign intrusion.
While earning a living as a coolie and rickshaw puller in Shanghai, Chan saves Yi-kiu, a famous singer, from some gangsters and receives an invitation to join the notorious Green Gang. He proves to be the best fighter in the gang and wins the favour of the boss, Choi Luk-kan. At the same time, he encounters the bandits who killed his family and they also happen to be the Green Gang's allies. Unable to convince the Green Gang to support him in taking revenge on the bandits, he learns a painful lesson to stay away from the gangs' illegal activities when the bandits kill his sister too. He leaves the Green Gang after avenging his sister and family.
Chan ultimately joins Ching-mou School after feeling impressed with Fok from their earlier encounters. He becomes Fok's favourite apprentice as he demonstrates a good understanding of Ching-mou's philosophy and founding principles, and hones his fighting skills under Fok's guidance. In the meantime, he meets and falls in love with Yumi, the daughter of Takeda Yukio, a Japanese consul. Their relationship is strained because they stand on opposing sides and come from strikingly different backgrounds. Besides, Ching-mou School strongly supports the local anti-Japanese movement, much to the Japanese's displeasure. Furthermore, Ishii Hideaki, Yumi's fiancé, has to come to Shanghai with his brother to start a karatedojo in the Hongkou District.
Meanwhile, Takeda takes charge of the Black Dragon Society's activities in Shanghai, including sabotaging the Chinese military in preparation for the Japanese to launch a future invasion of China. Knowing that Fok, whom the Chinese regard as a hero, must die in order for the Chinese people's morale to be crushed, Takeda sends a spy to infiltrate Ching-mou School and secretly poison Fok. Fok takes up a challenge from Ishii to fight in a lei tai match, but collapses halfway and dies due to the poisoning. Chan remains calm in the face of taunts and insults from Ching-mou's enemies after his master's death, and continues to lead his fellows to resist the Black Dragon Society. All members of the Ching-mou School ultimately die in the struggle, leaving Chan as the sole survivor.
After discovering that Takeda is planning to release a deadly virus in Shanghai and allow the Japanese to use that as an excuse to invade China, Chan breaks into the Black Dragon Society's base and takes down every fighter who stands in his way. He confronts Takeda and defeats him, but spares his life when Yumi begs him not to kill her father. Takeda commits suicide in humiliation after his defeat; Yumi, who was caught up in the fight and gravely wounded, dies of her injuries after Chan brings her back to Ching-mou School.
In the final scene, Ching-Mou School is surrounded by armed soldiers because the Japanese consulate has ordered Chan's arrest for the murder of Takeda. Chan speaks to the Chinese police inspector, who promises him to ensure Ching-mou School's survival, and then charges out with a flying kick at the soldiers as they open fire at him.
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