I do wonder if some of you need to take your nostalgia goggles off and see how shenmue 1 and 3 both have a story of a similar quality in my opinion. Shenmue 1 has next to no character development unless you go and speak to the characters seperare from the story.
Shenmue 3 was always meant to be about looking inward and I thought bailu village was great very reminiscent of shenmue 1.
Lets not play this game, because the complaints here have zero to do with nostalgia and that's a straw-man to invalidate opposing opinions. This game could have been far more fleshed out, and is not on the same level as even Shenmue 1. So much is left unanswered and undeveloped, things just sorta happen and no one talks about any of it again.
Shenmue Chapter 1 has countless cutscenes of Ryo having conversations, arguments, and pro-longed discussions with Fukuhara, Ine, Iwao, Master Chen, Guizhang and Nozomi about the choices and actions he is taking day to day in the name of revenge while also discussing details about your fathers past choices and actions. The most important part is these characters acknowledge and discuss events outside the events of the games time frame and Ryo's perspective which are used to connect everyone both to each other and Yokosuka as a grounded place. A good example of this is that your father is heavily present in the story even though he is technically dead, and often acts like a bridge between you and the locals.
Fukuhara is interacting with you and basically family because he was training under your father for some time, Ine is a seemingly hired housekeeper who has been with the family for years, and Nozomi is a fellow high school student and love interest that is in the same year as you and is going through the normal steps of graduation which you have tossed off entirely in favor of seeking revenge.
Meanwhile the Chen family is handled very similarly to Ren and The Heavens where they were in Shenmue 2, they are connected to your father and his import of the mirrors into Japan but they also in direct competition with Terry and the Mad Angels black market deals including the Long Zha putting your interests in line with their own even if they are reluctant to put your in harms way.
The important detail is that all of the characters even if they had not met you before, had connections with you and your family which gives them reason to help and interact with you. The dialogue was not redundant or there just to pad things out once cinematics and key events started. The only exception being when you wander around probing for information. The dialogue explains connections between each character in the world as well as their own personal goals and relationship with you.
Just like Iwao was your connection or bridge to Yokosuka, Guisang in a direct sense acts like the same sort of connection between you and Joy which is elaborated on by the Shenmue Side Story Comics which is why she likely goes out of her way to help you at the start of Shenmue 2 with a free/cheap hotel and what not. Its kind of terrible story telling to present it that way but its besides the point the connection exists, Guisang could not accompany you due to his injury so Chu and Guisang help give you footing in Hong Kong by connecting you with Lishao Tao and Joy.
Shenmue 3 should have used Shenfau as a similar bridge between yourself and the rest of Bailu which it seemed to try to do. The only stand out example was really forced and strange, when your first begin talking to the villagers in Bailu they all just sort of brush you off day one because you are foreign and smell of the city etc then Shenhau follows you around the next and they warm up and accept you from then on basically. It pretty much happens over the span of just a couple days.
The majority of meaningful character development and interactions about things outside of the direct plot-line are with Shenhau mainly but whats really strange about them is they heavily emphasis Ryo's past that you have already played through instead of building up the background details of Shenhau and her connections to Bailu and its people which seems more important than just revisiting past events.
You mainly learn Shenhau can talk to animals and spent most of her youth with them, has no recollection of her mother much like Ryo, was close to Meimei (prize exchange girl), was home schooled, and thats about it honestly. Her character seemed very vanilla or like she was avoiding elaborating on her past and she seemed very removed from the village honestly, maybe its foreshadowing but it just comes across lazy honestly for the moment. The dialogue was all very shallow and only covered a few seemingly minor details about her character and with pushing the narrative forward.
Bailu has you literally learning a bit about Shenhau, and dealing with a useless thug that is not important to the story at all. He has no useful information that develops characters or the world. He tells you where to go next, and then that's it. He was basically an obstacle and nothing more.
The scrolls for some reason direct you to Niaowu when it seems to have no direct connection to the purpose of the mirrors at all, so that makes zero sense. The only thing that seemed relevant from the scroll scene was the thin mountain range that looked eerie with dead trees likely meaning its the snowy region from the early footage with Niaou Sun. Im going to assume that scroll is likely the one of importance mentioned during the ending, is the place your headed at the end of the game which would make sense.
Chai values that scroll, so its clearly new and important information to some capacity to the Chiyoumen, which is not reflected at all in the plot in Niaowu at all. Lan Di, Niao Sun, and Gorrilla Man did not seem to have any interest in that scroll at all even though Chai clearly knew about it and should have passed on that they had found something important.
Niaowu honestly was not that relevant plot wise, it was basically a stepping stone to setting up the finale as well as some fun distractions and fan service, which is really strange considering that seemingly unimportant scroll with the rock formation made such an emphasis of the location. The only thing that makes sense at all with that in mind is something was in Lui Jaio Shrine as there was in the Bailu Watchtower, which is why the Red Snakes raided its wheel repository it shared in common with the tower and left. However this is never discussed again or elaborated on but its safe to say it likely was more scrolls or something else key to finding or getting into the location of the cache of treasure.
Seems like really terrible writing honestly there, its weird they emphasized and repeated so much in Bailu and Niaowu about Iwao, Zhao, and Lan Di. But then they never elaborate with further details as to what was in the cache.