The Sea King commands his soldiers to search the treasury for the Iron Rod, noting that only an immortal could remove it from the sea. When the soldiers return to report that the Iron Rod is missing, the Sea King reminds them that it can shrink to the size of a needle. Despite suspecting the rod is no longer in the sea, he orders a thorough search. Transforming into his dragon form, the Sea King tells Pinmei and Yishan to climb onto his back.

Amah dreams of Pinmei and wakes up crying. She tells the stonecutter that she hopes Pinmei is safe, but the stonecutter gently suggests that this might not be the right wish. As they converse, Amah admires the stonecutter’s craftsmanship and wishes for his own tools.

Amah begins to tell The Story of the Magic Paintbrush:

A boy named Liang, born into a fishing family, dreams of becoming a painter. Though he longs for a paintbrush, he cannot afford one or find the materials to make it. One day, while fishing, a girl gets caught in his net. He cuts the hair entangled in the net and sets her free, revealing that she has a fishtail.