The Marco Polo Bridge Incident on 7 July 1937 has been commonly regarded as the beginning of the second Sino-Japanese war. The early days of the war were a history of rapid Japanese advances and, inversely, of the equally fast retreat of the Chinese. The Chinese Nationalist Government evacuated Nanking and moved westward to the Wuhan area in late November 1937. Central China soon became untenable in face of heavy Japanese reinforcements; the Chinese government again evacuated in October 1938, this time much further west to Chungking in Szechwan. There was no declaration of war and China clearly had the sympathy of Britain and the United States. The two countries continued to recognize the government at Chungking, under the leadership of Chiang Kai-shek, as the government of China, despite the fact that it retained control only over the south-west corner of the country. Pearl Harbor strengthened the tie of relations; the Chungking government won Britain, the United States, and the Netherlands as allies in its colossal struggle against Japan.
The Reorganisation Loan, or as many Chinese writers call the Grand Loan of the Second Year of the Republic of China (Min-erh ta chiehk'uan), arranged by the 'Old Consortium',1played a significant role in Chinese internal affairs in the early twentieth century. The loan has been condemned by Chinese historians, nationalist and communist alike, as one of the ugliest crimes committed by the imperialist powers in China because it enabled Yüan Shih-k'ai to defeat theKuo-min tangin the Second Revolution in 1913, and to rid China of all semblance of democracy up to the point in 1915 when he aspired to re-establish an empire and to occupy the dragon throne himself. Being unanimously labelled as 'father of the warlords', Yüan's autocratic practices and his sudden death in June 1916 have always been blamed for throwing China into the disastrous warlord period, in which the country was split into autonomous units, and in the subsequent decades experienced chaos, weakness, and humiliation.