While the Japanese gave up their occupied sectors of Shanghai under international pressure, they moved ahead in north China, consolidating their occupation of Rehe and attacking Zhahar (Chahar). The Christian warlord Feng Yuxiang decided to make a bid for national leadership by mobilizing a resistance movement. Coming out of his self-imposed retirement at Zhangjiakou, Feng announced the formation of the People's Allied Anti-Japanese Army (Minzhong kang-Ri tongmeng jun) on May 26, 1933, and began gathering troops. Chiang Kai-shek, however, was thoroughly convinced of the importance of appeasing Japan in order to buy time to exterminate the Communists. On May 31, five days after General Feng's announcement, Chiang's representative, Huang Fu, negotiated a cease-fire with the Japanese. But public opinion seemed to support Feng. The Tanggu Truce was decried as a sellout and Huang Fu denounced as a pro-Japanese hanjian.
Chiang's Blue Shirts, fully accepting the generalissimo's policy of annei rangwai (first pacify the interior, then expel the external aggressor), shifted their attention to another sort of traitor: those who might collaborate with the Japanese by taking the role of puppet governor under the Occupation. By then, Dai Li, the future head of Juntong (Military Statistics, which was a euphemism for the secret police), was fully in charge of the Blue Shirts' intelligence and covert operations. Under his orders to assail internal rather than external enemies (a redirection that sometimes smacked of scapegoating), secret agent Zheng Jiemin arranged the assassination of Zhang Jingyao, the Hunanese warlord then negotiating with the Japanese. Zhang's demise was meant to scare other hanjian out of collaborating with the Japanese.
For there was a significant stratum of political figures, many of them former Beiyang militarists and bureaucrats, who bore a deep antipathy toward the party of Sun Yatsen and other southerners who had adopted a radical agenda of revolutionary nationalism. Culturally conservative and often trained in Japanese military academies and universities in the last years of the Qing, these northern Chinese leaders saw little harm in cooperating with victorious Japanese generals in the name of a new order in East Asia that would repel Anglo-American imperialism on the one hand, and Soviet Bolshevism on the other. And even if they did not want to venture as far as outright collaboration, they could easily see that it was to their advantage to create a gray zone of complex and ambiguous loyalties that left them some room for maneuver.
Dai Li's strategy, however, was to force these political actors to choose between being live heroes or dead hanjian. Gan Guoxun, one of the Lixingshe's founders, later said that the assassination of Zhang Jingyao "aroused and excited the heroes [haojie] of Yan and Zhao[,]… completely changing the social atmosphere of northern China, which was feudal and self-indulgent. All those hanjian, such as Wang Kemin, Wang Jitang, and Gao Wenyue, went into hiding. Squirming like worms, they were afraid to make any move whatsoever. Representative northern warlord figures such as Duan Qirui and Wu Peifu bowed to public opinion and pledged loyalty to the center."
Zhang Jingyao's assassination also convinced the Japanese that the Blue Shirts were responsible for most of the terrorism directed against hanjian in north China during the period 1934–35, and at their insistence the Lanyishe was supposedly disbanded. In fact, it continued to operate under other guises, partly as an agency engaged in anti-Japanese activities commanded by General Dai Li and partly as a rubric for numerous patriotic and terrorist activities directed against hanjian throughout China.