The most-serious immediate problem facing the new government was the continuing military separatism. The government had no authority over the vast area of western China, and even regions in eastern China were under the rule of independent regimes that had lately been part of the Nationalist coalition. After an unsuccessful attempt at negotiations, Chiang launched a series of civil wars against his former allies. By 1930 one militarist regime after another had been reduced to provincial proportions, and Nanjing’s influence was spreading. Explained in material terms, Chiang owed his success to the great financial resources of his base in Jiangsu and Zhejiang and to foreign arms. Quick recognition by the foreign powers brought the Nationalist government the revenue collected by the efficient Maritime Customs Service; when the powers granted China the right to fix its own tariff schedules, that revenue increased.

Although the aim of constitutional, representative government was asserted, the Nationalist government at Nanjing was in practice personally dominated by Chiang Kai-shek. The army and the civil bureaucracy were marked by factional divisions, which Chiang carefully balanced against one another so that ultimate decision making was kept in his own hands. The KMT was supposed to infuse all government structures and to provide leadership, but the army came to be the most powerful component of government. Chiang’s regime was marked by a military orientation, which external circumstances reinforced.

Nevertheless, the Nationalists did much to create a modern government and a coherent monetary and banking system and to improve taxation. They expanded the public educational system, developed a network of transportation and communication facilities, and encouraged industry and commerce. Again it was urban China that mainly benefited; little was done to modernize agriculture or to eradicate disease, illiteracy, and underemployment in the villages, hamlets, and small towns scattered over a continental-size territory. With conscription and heavy taxation to support civil war and a collapsing export market for commercial crops, rural economic conditions may have grown worse during the Nationalist decade.

The Nationalist government during its first few years in power had some success in reasserting China’s sovereignty. Several concession areas were returned to Chinese control, and the foreign powers assented to China’s resumption of tariff autonomy. Yet these were merely token gains; the Unequal Treaties were scarcely breached. The country was in a nationalistic mood, determined to roll back foreign economic and political penetration. Manchuria was a huge and rich area of China in which Japan had extensive economic privileges, possessing part of the Liaodong Peninsula as a leasehold and controlling much of southern Manchuria’s economy through the South Manchurian Railway. The Chinese began to develop Huludao, in Liaodong, as a port to rival Dairen (Dalian) and to plan railways to compete with Japanese lines. Zhang Xueliang (Chang Hsüeh-liang), Zhang Zuolin’s son and successor as ruler of Manchuria, was drawing closer to Nanjing and sympathized with the Nationalists’ desire to rid China of foreign privilege.

For Japan, Manchuria was regarded as vital. Many Japanese had acquired a sense of mission that Japan should lead Asia against the West. The Great Depression had hurt Japanese business, and there was deep social unrest. Such factors influenced many army officers—especially officers of the Kwantung Army, which protected Japan’s leasehold in the Liaodong Peninsula and the South Manchurian Railway—to regard Manchuria as the area where Japan’s power must be consolidated.