By the end of the first week, the group has settled into somewhat of a routine. Chang is tireless in his efforts to smooth all their rough spots. He even allows them access to the valley. Conway finds it nothing less than an enclosed paradise, spanning the whole gulf between temperate and tropical. The people are a blend of Tibetan and Chinese and are clean and handsome as well as hospitable. It is one of the pleasantest communities he's ever seen. Miss Brinklow sees it as an opportunity to begin a mission among these people and to that end, she asks Chang for a book so she can study and learn the language.
Conway continues to make good use of the library and the music room. However, he notes to Chang that it is not quite up-to-date. Many things from the year before have not made it into their library. Chang says in response, Nothing of importance that could not have been foreseen in 1920, or that will not be better understood in 1940. Conway tells Chang that he thinks he's beginning to understand him: time means less to him than it does to most people. However, when he asks how long it's been since they had visitors to Shangri-La, Chang is once again unable to say.
The conversation then moves to that of the little Manchu. Conway cannot determine if she is a student of music or merely plays for pleasure. He wonders aloud if she likes being there, and Chang observes that she doesn't seem to dislike it. She is like an ivory doll more than a human being to Conway, but he is more fascinated by her than he has ever been by any other woman. They also discuss the valley people, and Conway questions the ultimate basis of law and order there. Chang says that crime is rare, because everyone has everything they need. The lamasery does have the power to expel anyone, but it is rarely used, because it is such an extreme and dreadful punishment. He says that the use of courtesy, as everyone in the valley is taught, smoothes out any problems.
Later, in a conversation with Mallinson, the two men observe first how happy Barnard seems to be and then, Mallinson's discovery that he is traveling on a forged passport. In fact, Mallinson has also seen some newspaper clippings that Barnard dropped, and from the pictures in them, he's convinced that Barnard is Chalmers Bryant. Chalmers Bryant had been the head of the Bryant group in New York and had lost about 100 million dollars and then disappeared. That night, Barnard admits who he is and Conway finds it hard to think this genuinely good-humored man is the world's biggest swindler. Barnard explains how the whole financial deal fell through, and how easy it was to lose all that money without meaning to do so. He says he intends to stick around the lamasery for a long time and let what will happen, happen.
Conway observes that they shouldn't argue over this point or any other.
He sees that three of them, minus Mallinson, have come to feel very comfortable
there, and he, especially, is not looking forward to any porters arriving
to take them back to the real world. He thinks to himself that he could
keep people out there entranced for a long time with any stories he brought
back about Shangri-La, but he wonders if he would enjoy it. His thoughts
are then interrupted by Chang who is bearing important news: the High
Lama wishes to see Conway immediately. Chang tells Conway that this is
extraordinary and unprecedented. He reveals that Conway now will learn
the answers to many of his questions.
This chapter helps the reader understand how three of the travelers are coming to love the lamasery and the valley. Only Mallinson is still discontented and wants badly to go home. Conway is more and more at home and has many wise and interesting conversations with Chang. He is impressed with the life there, fascinated by the mystery behind it, and reluctant to leave. He has even impressed the lamas as seen in his unprecedented invitation to speak to the High Lama. Now he will begin to learn the truth behind the travelers' arrival at Shangri-La.