Bob Kenyon has found three enormous, flawless pearls, and with them, he's told, trouble. His partner in the pearling business, a lean, bearded New Zealander named Captain Watts is wary of the pearls, knowing that the nearest port, on the island of Illola, is a cess-pool of criminals and lowlifes who would cut his and Kenyon's throats in a heartbeat if they knew about the pearls. Unfortunately, Illola is also home to the closest good, square dealer in and appraiser of pearls, a bearded man known as Old Isaacs.
Once Old Isaacs gives his opinion that the pearls should be taken to New York at once to get their full value, Kenyon goes ashore on a different mission - he's looking for Shanghai Jim, the evil bastard who murdered his brother years earlier. His hunt on land unsuccessful, Kenyon returns to the boat - and finds Shanghai Jim standing over Captain Watts' corpse, a bloody knife in his hands. A struggle ensues, and when the authorities arrive, all they find is Bob Kenyon, bloody knife in his hand and the pearls in his pocket. Now Bob Kenyon has to convince the authorities that he's innocent and that Shanghai Jim murdered Captain Watts -- when the authorities believe Shanghai Jim has been dead for years...
"Shanghai Jim" almost feels like two stories in one; Packard spends a lot of time building up and laying his cards on the table regarding the pearls and Watts' concerns and Old Isaacs' examination of them. After this we get a short bridge with Kenyon wandering from dive bar to dive bar looking for Shanghai Jim, and then the second story picks up with Watts' murder and follows Kenyon's efforts to escape the frame-job Jim has pulled on him. We also get something of a how-dunit, because there's some effort to understand how Shanghai Jim found out about the pearls. Packard feeds us a whole catch of perfectly plausible red herrings to keep us on our toes, and he finally reveal is fantastic, albeit abrupt.
If I had to find fault in "Shanghai Jim," it's the way the story just kind of throws things at us to see what sticks. There's a romantic angle where the daughter of the British colonial administrator is Kenyon's ex-girlfriend, whom he lost over a tragic misunderstanding years earlier; they reconcile while sitting in the dark waiting for Shanghai Jim to show up, and this kind of had me rolling my eyes; the story just kind of bogs down in them telling each other what they perceived as having happened that fateful day, and what actually happened, and the tension that should be building as Kenyon waits for Jim, knowing that at any minute the police could burst in after him, just fizzles out entirely and never wholly returns.