The year of 1936 was a turning point for the Chinese Communist Party (CCP). On the one hand, the main force of the Red Army had completed its heroic long march in early 1936 and joined a local Communist force in the region of northern Shaanxi; on the other hand, Zhang Xueliang, the “Young Marshall” who was prodded by Chiang Kai-shek to fight the Red Army, decided to kidnap Chiang on December 12 and to force him to turn his guns against the Japanese rather than the Red Army. These dramatic developments offered CCP leader Mao Zedong a prime opportunity to consolidate the fragile Communist control in the Shanganning Border Area (hereinafter the Border Area). Together they transformed the Party from being a “marginal force on the periphery of Chinese society” into being the “major contender for national power” after the war. According to Zhang Guotao, one of CCP's founders and a contender with Mao for power inside the Party, a negotiation with Chiang Kai-shek was critical to the survival of the CCP. Mao therefore “concealed” his animosity toward Chiang and “pretended” to make resistance to the Japanese a primary goal of the CCP. The CCP publicly announced that it was willing to make significant compromises such as declaring the Border Area a regional government under the Nationalist Party (the Guomindang, or GMD) and recognizing Chiang Kai-shek as China's sole leader.

Soon after Japan launched a sweeping attack on China in July 1937, the CCP proclaimed that resisting Japan should be the top priority of the nation and the Red Army would fight under the GMD.