Detective Chan escapes being murdered, and with his son he tracks down the opium-smuggling gang that murdered a British agent.
Charlie Chan (Warner Oland) gets a note warning him not to get off the ship at Shanghai. He is welcomed by Philip Nash (Jon Hall), Diana Woodland (Irene Hervey), and his son Lee Chan (Keye Luke). At a banquet Stanley Woodland opens a box, which shoots him. Someone also shoots at Chan in bed; but he had put pillows there. The hotel phone operator tells Marloff something went wrong. They send a note for Chan to meet with the police and intercept his phone call to confirm it. When the police call, son Lee follows Chan but is hit by the taxi driver and brought to where they are questioning his father. Lee says the cops are coming and helps his father to escape.
James Andrews (Russell Hicks) arrives and is given a letter from Stanley's desk which seems unimportant. Andrews tells Chan that Stanley was a British agent and that he is an American agent sent to work with Chan investigating the opium trade. Chan prevents a gun from shooting at them. Nash is suspected, and Chan checks the fingerprints on the gun, finding they are Nash's. The police chief (Halliwell Hobbes) arrests Nash. Chan shows that the window could be locked after going out. He finds invisible ink on the letter, naming Marloff. Andrews also checks the letter for invisible ink. He and Chan go to the kidnap house, and Chan finds Nash's fingerprints on paper and a rubber-stamp. A disguised beggar comes in, but it is Lee. Chan and Andrews tell the police of their work, and Diana comes to visit Nash. She gives him a gun and drives him away in her car. Chan goes to Andrews' where he has tied up one of the kidnappers he caught looking at his papers. When they leave, Arnold's servant frees him.
At a club Nash is taken to the cellar; but Marloff, realizing that Chan planned his escape, knocks out Nash. Marloff and his gang take Nash and boxes out to the boat. Chan and Andrews see the taxi driver in the club and follow him to the cellar, where Chan finds bottles used for smuggling opium. The police arrive in a boat, shoot, and arrest the gang. Chan explains how Nash's fingerprints were stamped on the gun. Then he has Andrews arrested as the head of the gang, as Lee brings a cable stating that the real Andrews was murdered. Chan lets his son call his girl-friend.
The gentle and cultured Chan has his usual aphorisms and detective intuition in his ancestral land. Interaction with his son adds a parental dimension, as the young man's energy complements the elder's wisdom. Historically European-smuggled opium did much to devastate China.