As the Crown Prince grew, he was known as an overly active child who liked carrying out dangerous tasks, such as climbing flag poles, and he had severe mood swings and was so impulsive that his attendants could not stop him from taking violent actions.
Chu and Yuan soon added Emperor Houfei's distant relative Liu Bing to their own rank to be involved in important decisions.
Meanwhile, Xiao was offered a plan of deception by his subordinates Huang Hui (黃回) and Zhang Jing'er (張敬兒) -- that they would pretend to surrender to Liu Xiufan and then assassinate him, and he agreed with it.
Xiao and Yuan Can (who had returned to the government in light of the emergency) then defeated Liu Xiufan's remaining troops, ending the rebellion.
In light of the victory, Xiao was promoted to be part of the decision-making nucleus, along with Yuan, Chu, and Liu Bing.
The people instead were hopeful that his cousin Liu Jingsu (劉景素) the Prince of Jianping, who was an adult and was considered a kind and generous man, could become emperor.
The situation was getting sufficiently severe that even Ruan, who had wanted to keep Emperor Houfei in power, instead plotted to depose him, but was discovered and executed.
When Emperor Houfei subsequently received reports that the officials Du Youwen (杜幼文), Shen Bo (沈勃), and Sun Chaozhi (孫超之) were part of Ruan's conspiracy, he led his guards and personally executed Du, Shen, Sun, and their households, cutting the bodies to pieces, including even infants.
Xiao became fearful after the incident, and he initially discussed with Yuan and Chu the possibilities of deposing the emperor, but could not get them to go along with his plan.