The town of Happy Valley is being hit hard by a malaria outbreak, causing families to leave and turn the town into a "ghost city."
Captain Superintendent Longstaff has returned from a successful mission in Canton and plans to continue the war against China, starting with a large-scale attack in the north.
He also plans to establish a monopoly on opium in China through the acquisition of opium seeds.
Struan advises Longstaff against this plan, warning that it will lead to disaster.
Longstaff dismisses Struan's warning and plans to proceed with his plan.
Struan offers Aristteles Quance a job and Culum offers him a house in the nearly empty Valley of Happy.
Struan proposes that Culum and Tess get married within the month, causing tension between Struan and Brock, who had planned to delay the wedding.