The next year the division was involved in the defence of Shandong from a Japanese invasion and Xie was badly wounded in the defense.

After he recovered he took command of the machine gun battalion of the regiment, and was later promoted to major and transferred as a staffer to the Wuhan HQ.

On 26 October 1937, as the Chinese defense of Zhabei faltered, Chiang Kai-shek wanted to withdraw all Chinese forces to defend the rural western regions of Shanghai and ordered acting commander of the 3rd Military Region Gu Zhutong to leave the 88th Division behind to cover their retreat.

However both hesitated to go against Chiang's orders; Sun instead suggested that the number of troops left behind to cover the withdrawal would not matter.

Its proximity to the Shanghai International Settlement made it world-famous and brought the war between the Chinese and Japanese to the world's attention, if only briefly.

Xie realized that doing so would reveal to the Japanese (who had been fooled into thinking an entire regiment was stationed at the warehouse) their real strength.

The nearby Shanghai International Settlement was concerned at the combat taking place so close to them and petitioned Chiang to stop the fighting.

Chiang, who considered the fight already won, agreed to withdraw the 524th Regiment to the foreign concessions before regrouping with the rest of the 88th Division.

Their practice of singing the National Anthem of the Republic of China every day was continually disrupted by the foreign authorities, until it was violently put down by White Russian mercenaries.

Xie married Ling Weicheng (凌維誠) in 1929, and had two sons and two daughters: Youmin (幼民), Jimin (繼民), Xuefen (雪芬) and Lanfen (蘭芬).