I think it goes all black and Ryo gets knocked out and then Lan Di confronts Shenhua and says something like "I have come to take your power for the Chiyoumen."
I could be getting confused with the first Shenmue as well.
The bad ending for S1 is pretty good. Lan Di returns to the Hazuki Dojo and kicks Fuku-sans head in and then Ryo goes for him and Lan Di deflects it relllllly hard and then the screen goes white.....