That's the main problem of the game: we're 3 games in and Ryo has yet to face a Chiyoumen leader. Progression cannot be fast, but it just can't be against thugs all the time. As you said, Ryo is not a beast and it wouldn't make sense if he could defeat all his opponents straight away (I wouldn't like that either). But the road to the thugs leader has to stop at some point if we want the story to progress.
I can see 2 scenarios :
1) Less important characters are going to be cut from the game and Ryo will only have to face the Chiyoumen leaders, meaning his current power up is well balanced
2) Considering the fact that Lan Di has been raised by the Chiyoumen, we can assume that Lan Di will eventually understand that he killed Iwao for nothing because Tentei lied about his father's death and he'll team up with Ryo to take down the Chiyoumen (Niao Sun tried to kill him and tries to be the leader, so there's a conflict)
And I'm going to quote this :
Suzuki hints at new characters coming to the game, without revealing too much about them.
The game will feature "four main bosses," Suzuki says. One of these is Lan Di, who returns from
Shenmue and
Shenmue 2.
First boss in Bailu, Mr Muscles and Lan Di, so one is missing. It was either Niao Sun, but unlikely because she turns out to be against Lan Di. I'm going to bet on another Chiyoumen leader, meaning one was supposed to go down in S3 with 3 left for the next 2 games.
Things I'd have added to SIII :
- More infos about Sunming Zhao's death (we already knew that he died under mysterious circumstances, nothing new)
- Proper fight with Chai and not simple QTE's
- Better reunion between Ryo & Ren because it seemed so weird to me. I wasn't expecting bro's high five, but damn...
- The boss that didn't make it into the game, him being one of the leader so Ryo's progression is not unbalanced in the next games
- Better introduction of Niao Sun. Like many of you said, Ryo doesn't know her, so she has nothing to hide from him. As fans, we know about her so when Ryo arrived in Choubu, I already knew the girl on the boat was Niao Sun, but from Ryo's perspective, it's totally different
- More conversation time between Shenhua's father and Ryo
- More focus on key characters like Feng, Lin Shiling, Sun instead of the rich dude in Choubu etc
- More dialogues between Ryo & Lan Di
Suzuki san is probably confident about the possibility to release a 4th game and I trust him. Shenmue III is a fantastic game and could have been even better with more story content & better focus on key characters.