After the Mukden Incident, Japan had acquired control over Manchuria and would eventually establish the puppet government of Manchukuo, which had caused massive anti-Japanese demonstrations and boycotts across China, especially in major cities such as Shanghai and Guangzhou.

[12] This caused an upsurge of anti-Japanese and anti-imperialist protests in the city and its concessions, with Chinese residents of Shanghai marching onto the streets and calling for a boycott of Japanese-made goods.

[13] Starting from January 22, Admiral Shiozawa of the Japanese Navy and Consul General Murai demanded that Shanghai Mayor Wu disband anti-Japanese societies and boycott activities.

[10][11] On the other hand, as threats and rumors of the Japanese naval landing forces' action echoed in Shanghai, the nearby 19th R.A. units moved closer to the Little Tokyo of the International Settlement.

The Chinese public and critics of the Nanjing government were clamoring punishment for the forces of Manchurian warlord that failed to stop the Kwantung Army's blitzkrieg, which embolden the officers of the 19th R.A. to take a stance.

Since the Nanjing government had not implemented any policies, General Cai Tingkai and his colleagues held an emergency meeting on January 23, vowing to resist any possible invasion of Shanghai by the Japanese navy at all costs.

By January 27, the Japanese military had already concentrated some 30 ships, a number of seaplanes, and nearly 2,000 troops around the shoreline of Shanghai to put down any resistance in the event that violence broke out.

The 19th Route Army, unpaid by the bankrupt government, were seen at worst as potential looters who might enter the wealthy Settlement,[11] posing as great a danger to Shanghai as the Japanese military.

[16] Though the opening battle took place between the Hongkou and Zhabei districts of extra-settlement Shanghai, the conflict eventually spread outwards towards Wusong and Jiangwan.

The foreign concessions remained largely untouched by the conflict, and it was often the case that those in the Shanghai International Settlement would watch the war from the banks of Suzhou Creek.

On February 12, American, British and French representatives brokered a half-day cease fire for humanitarian relief to civilians caught in the crossfire.

On February 20, Japanese bombardments were increased to force the Chinese away from their defensive positions near Miaohang, while commercial and residential districts of the city were set on fire.

On February 28, after a week of fierce fighting characterized by the stubborn resistance of the troops mainly from Guangdong, the Japanese, supported by superior artillery, took the village of Jiangwan (now Jiangwanzhen), north of Shanghai.

Following their encirclement, Chinese troops abandoned Shanghai and the surrounding area, and on March 3, the Japanese Commander gave the order to stop the fighting.