Chiang’s government decided it must seek a compromise with Japan, and on May 31 the two countries signed the Tanggu Truce. The terms of the treaty were designed to save face on both sides, but they marked a de facto recognition of Manchukuo. Under the terms of the truce, there would be a demilitarized zone between the Great Wall and an area north of Beiping and Tianjin. The Japanese were allowed to maintain observation rights in the area, and Chinese troops were forbidden from engaging in “provocations.” It was clearly an embarrassment for China, but in the short term it was a very useful
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