The film opens with a shot of Shanghai, 1910, and zooms into an arena where Huo Yuan Jia (Jet Li) is awating a martial arts four against one competition. The rules are that the competetors go against Yuan Jia one at a time, and either side loses when he goes down or surrenders. He takes on an English boxer, an English spear master, and a French swordman, defeating all 3 easily. The announcer then declares a Japanese fighter will take on Yuan Jia, and as the two stare each other down the main credits roll.
A young Yuan Jia watches his father (Collin Chou, or Seraph of The Matrix fame) train in the art of wushu, where he flat palms a stone table. After his father leaves Yuan Jia comes to check the seemingly intact table, only to have it fall apart the second he touches it. He then goes to see his father as he trains several students, but his father has makes him leave to go study. Instead, he goes outside to practice the martial arts he saw his father did, while making his best friend do his homework. Yuan Jia drags his friend away to town to watch something.
In the center of town is a large stone circle where fighters battle on a regular basis. Yuan Jia's father is set to fight against a man named Zao Zhong Qiang, and Huo Yuan pushes his way to the front to see. Huo Yuan stand next to Zao Zhong's child, and the two argue about who will win. It is shown that both fighters have signed a waiver for their deaths, and are prepared for the worst. Huo Yuan's father is easily winning the fight, causing Yuan Jia himself to talk trash to Zao Zhong's child. After pushing his opponent to nearly falling out of the ring Huo Yuan's father winds up for a vicious blow, but pulls back at the last second. He is knocked out of the ring and loses. Yuan Jia is upset that his father would so easily give up a fight and tries to fight Zao Zhong's child, but is beat badly. After getting up, he swears he will never lose again.
Back at home, Yuan Jia protests to his mother about his father's refusal to teach him kung fu. It is apperant that he has athsma, as well as a weak body. His mother believes that he wants to train in wushu to become stronger, but Yuan Jia wants to use it to get revenge. His mother tells him that wushu is not ment for revenge, but to control one's rage, for the sake of morality, and to help others. Yuan Jia still insists that people will respect him if he learns wushu, but his mother says fear and respect are two different things. Yet, Yuan Jia continues his wushu outside, flat palming a table like his father as his friend does his homework.
We suddenly cut to a tough, older Yuan Jia walking into a room, throwing out a fist...and losing to his daughter at rock paper scissors. He plays with his daughter and talks about his asthma, which seems to have become much better with training. We also learn that Yuan Jia hasn't lost in years, and raises his daughter with the help of his family as his wife is no longer there. Yuan Jia goes to a shrine for his father, who has passed away, and tells him although his father wasn't strong enough his own power will more than make up for it. He will become the number one fighter in his area. Yuan Jia's daughter offers to give him a handmade pouch, but only if her father wins his fight.
It is 1910. On the way to a fight we see a crazy homeless man among the crowds who praises Yuan Jia as the strongest. At the town courtyard, which today has a large wooden platform at least 50 feet above the ground built atop the stone ring, we see Yuan Jia's challenger is the one who beat him up as a kid. His challenger says that he has traveled all around China and become the number one fighter, which Yuan Jia scoffs at. He climbs up to the platform and fights his rival. Despite his rival fighting underhanded as his father did and having learned several new techniques, including an unbreakable stance and tiger claws (which Yuan Jia calls kitten claws) Yuan Jia wins and knocks his opponent off the platform. Despite a bad fall he somehow survives and Yuan Jia celebrates at his best friend's restaurant, where he accepts new students on a whim. His daughter waits for him at home patiently, but sadly.
That night Yuan Jia's friend lets him try western coffee, which he doesn't not paticurally enjoy, and Yuan Jia takes him to the stone ring. He says how in the ring, the only two things you can worry about is winning and losing, and that he won't lose. He proves it by beating all challengers of all styles, even beating all challengers that he had for that day in one fight. Nearly the entire crowd is behind him, including the crazy bum. Yuan Jia also takes even more and more students, although only on a whim and not on talent or merit. It's clear his friend doesn't like what he's doing, but Yuan Jia insists that he will go beyond his area and become the greatest ever.
Another figher returns to the area, named Qin. Yuan Jia and him share a conversation as they walk down a street until they are separated by coffins. Yuan Jia offers Qin a gift and kicks one of the coffins at him, which Qin stops and knocks back. It's clear the two have bad blood. At home, Yuan Jia's debts are increasing due to the number of students he has and their free spending habits. As he discusses this several of his students return, one in a stretcher and badly hurt. They say Qin beat them up. Without questioning it Yuan Jia goes to his friend's restaurant to fight Qin.
At the restaurant we see it is Qin's birthday, and he is enjoying a simple, happy one. But Yuan Jia is there, and is drinking. He threatens Qin's godson to get Qin's attention, and has even signed the death wavier for fights already. Yuan Jia's friend comes over to convince him otherwise, but ends up breaking off their friendship. Yuan Jia has everyone leave the restaurant, and although Qin doesn't want to fight Yuan Jia has set him up so he cannot refuse. The two fight and end up destroying most of the restaurant, but Yuan Jia eventually pins Qin against a pole and punches him in the chest with a corkscrew punch (IMPORTANT) than is so powerful the blow can be seen through Qin's back.
As Yuan Jia leaves the restaurant Qin's follwers run inside and call for help. As Qin is brought to a building and doctors work on him, Qin's godson watches from outside nervously and upset. Yuan Jia spends the night out, and finds out in the morning that Qin has died from his wounds. The crazy homeless man still insists that Yuan Jia is now the greatest. As he returns home he finds his mother and daughter murdered. He goes to Qin's home but before Yuan Jia can get to Qin's godson he commits suicide. As Yuan Jia comes outside Qin's followers throw one of his students at him, and we find out that Qin had him beaten because he was having an affair with his wife. Disgraught, Yuan Jia leaves.
Yuan Jia spends some time wandering with his daughter's pouch, and tries to commit suicide in a lake, but is rescued and brought to a village. Here a girl named YuChi and her grandmother takes care of him, helping him wash his hair and such, but Yuan Jia still has no passion for life. YuChi teaches Yuan Jia lessons about life, and he begins to understand what his parents wanted him to learn. As Yuan Jia starts to walk around we see that the villagers don't fear him so much as respect him, as his mother once told him. He spends time with the children and planting crops. While he lives there over several years Yuan Jia learns to accept the calmer, peaceful way of life that he has been shown. However, Yuan JIa also wants to return to visit his parents' grave. YuChi is sad, but she says she will remember him.
As Yuan Jia returns he sees his hometown has changed and become more of an international fair, with camels and westerners wandering the streets. The stone circle for fights has become a bazzar and the streets are far busier. Yet, the crazy homeless man still remembers Yuan Jia, and still considers him number one. Yuan Jia returns home to see that his house has become somewhat messy and unkept. In his absence Yuan Jia's leftover debts were collected on, leaving only his family shrine, a few pieces of furniture, and all his markings of victory. The only thing that kept his house was a donation of money, which his uncle believes was given by Yuan Jia's friend.
It is now 1909. Yuan Jia makes peace with himself, appolgizing to his parents and daughter for letting them down. He also reads a modern newspaper showing a boxer by the name of Hercules O'Brian (Nathan Jones), and recieves a challenge to fight him soon after. At the fight, which is a boxing ring in the middle of a tent, the announcer declares that O'Brian can do things like punch through the Great Wall of China or kill a kung fu master with his pinky, enraging the Chinese in the audience. Yuan Jia makes his entrance and is asked to sign the death wavier, but he refuses saying he would rather make friends through Wushu. However, the announcer goes to O'Brian and says that Yuan Jia said he can kick his butt.
The two fight, and it's clear that Yuan Jia is at a disadvantage in terms of power, reach, height, and many other factors. However, Yuan Jia gives O'Brian more than a challenge, knocking him down easily and bending several of his joints. At one point Yuan Jia throws down O'Brian, knocking loose some of the nails that holds the floorboards in place out the side of the ring. After showing that he could win easily, Yuan Jia pays respects to O'Brian and tries to leave, but O'Brian grabs his feet. O'Brian is kicked, falls out of the ring, and nearly impales his head on the nails, but Yuan Jia saves his life. O'Brian ends up showing respect to Yuan Jia, much to the enjoyment of the Chinese and the dissapointment of the foreigners in the room.
Yuan Jia gains fame based on the fight and opens a new school for wushu. He also recieves an invitation to see his best friend, who has forgiven him. He offers Yuan Jia alcohol, but he passes and takes tea instead. We find that Yuan Jia's friend has sold his restaurant with the intention of helping Yuan JIa finance his wushu school. The two open a large school, where students pledge to use wushu in order to become stronger and find inner peace, not to fight.
We see a gathering of a few right westerners and a Japanese businessman named Mita (Masato Harada, playing a near cut and paste version of his character from The Last Samurai) discussing how everyone lost money on the O'Brian/Yuan Jia fight. They discuss rigging a fight against him to make back all their money and crush the Chinese spirits. One man disagrees, saying he'll bet his money on the Chinese to win. Meanwhile, Yuan Jia discusses the future of his school with his friend, leaving his friend to run it should Yuan Jia die or retire. Yuan Jia wants to go back to see YuChi and her grandmother, as he misses them. Yuan Jia then has tea with the Japanese fighter, Anno Tanaka (Shido Nakamura) from the beginning of the film. The two discuss philosophy and it is clear the two have a deep respect for each other.
We return to the beginning of the film, just before Yuan Jia is to fight Tanaka. Tanaka is disgusted with the way Mita has arranged the fight. In the ring Tanaka offers Yuan Jia to fight a different day under fair circumstances, but Yuan Jia says he is already present and will fight. Tanaka takes a samurai sword and Yuan Jia takes a triple length staff, and the two battle in a respectful duel to a draw. As the crowd cheers, Mita has Yuan Jia's tea replaced with poisoned tea, and as Tanaka and Yuan Jia begin the hand to hand portion of their fight he begins to get sick and vomits blood.
The match is halted so that Yuan Jia has a chance to withdraw, but he decides to continue. He asks his students not to take revenge for what he acknowledges is his approaching death, saying that there is enough hate and it must end at one point or another. Mita, on the other hand, is pushing Tanaka to finish the fight. As he re-enters the ring his students and eventually the entire arena cheers for Yuan Jia. Tanaka pleads with Yuan Jia to withdraw, but Yuan Jia insists on finishing. Tanaka then pledges he will fight with all his strength, to Yuan Jia's pleasure. Although Yuan Jia is losing badly he still manages to land a few solid blows, and manages to get his corkscrew blow through Tanaka's guard...but stops short, just as his father did, and falls to the floor.
Mita yells at the referee to end the match, but before he can Tanaka calls him off and withdraws from the match, making Yuan Jia the winner. Mita is angry with Tanaka for withdrawing, but Tanaka says that he knows he lost. Mita calls Tanaka a disgraceful Japanese, to which Tanaka nearly beats up Mita for. As Yuan Jia dies in the arena his spirit is shown training at night in an empty field, where YuChi comes out to watch. As he finishes he turns to smile at her, and the film ends.
*CUT TO THE CHASE*
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After losing his family to his arrogance in fighting Huo Yuan Jia (Jet Li) finds inner peace and builds a school for his martial art, wushu. He is poisoned and killed by foreigners hoping to make money on a martial arts match, but his opponent, an honorable Japanese fighter, withdraws from the fight, making Yuan Jia the winner. Yuan Jia dies, but is finally at peace.
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