China Jones (Daffy) is an Irish detective living in Hong Kong. While eating at a restaurant in town, he receives a fortune cookie with the message: "HELP!! I'm being held prisoner in a Chinese bakery. - £150 reward." Daffy is eager to make some money, but knowing that there are thousands of bakeries in China, he is in need of a good hot tip. After seeing someone banging a drum and advertising "Good Hot Tips at Limey Louie's Place", he decides to go there.
While waiting for a rickshaw, Daffy encounters Charlie Chung (Porky), a plain-clothes man who tells him, "Neglect. Must bring up matter of money." Daffy believes that Porky is trying to get a slice of the £150 reward for himself, and tells him he isn't interested. With that, Daffy hails a rickshaw and goes to Limey Louie's. It turns out that Louie is a criminal that Daffy had thrown in prison, who wants revenge.
Louie dresses in drag as his own wife, and recounts to Daffy how the prison guards had beaten him, by beating Daffy up. Daffy then asks for a good hot tip, which leads him to the house of "The Dragon Lady", who promptly breathes fire in Daffy's face, hence her name. Daffy returns to Louie's, and gets another tip, leading him to a sampan at a nearby wharf. Someone under the water cuts the mooring rope, causing the sampan to sink with Daffy on it.
When Daffy returns, Limey Louie reveals himself to Daffy, saying that there is no prisoner in a Chinese bakery. Daffy runs into another room, but is left hanging on the edge of a trap door leading to a room filled with crocodiles. Louie comes in and plays "piddies" with Daffy, causing him to fall and get thrashed by the crocodiles.
Daffy escapes with some injury, and encounters Porky yet again. He reveals that he is Daffy's laundryman, and that Daffy has a large bill which has to be paid off (hence the "matter of money"). Porky takes out a club, and forces Daffy to press laundry to pay off the bill. As Daffy is pressing, he shouts in Chinese, "Help! I'm being held prisoner in a Chinese laundry!" Iris out.