In early 1938, Nazi Germany, under the leadership of Adolf Hitler annexed Austria on March 12th, making it a part of Germany. This annexation was welcomed by the Austrian people and seen as another success in Hitler's foreign policy. In September, Hitler demanded sovereignty over the Sudetenland region of Czechoslovakia. However, Britain and France pursued appeasement policies, allowing Hitler to annex the area. On September 30th, the Sudetenland region was officially absorbed into Germany.
Turning to East Asia, in the spring of 1938, the Japanese army continued its aggressive campaign, capturing much of the Shansi province (山西省) in April and meeting with the Shanghai Expeditionary Army (上海派遣軍) in Kiangsu (江蘇) in May. By this time, most of China's eastern coastal regions had fallen under Japanese control, while the Communist Party continued to lead guerrilla resistance in rural areas.
On June 9th, the Nationalist government deliberately breached the Yellow River at Huayuankow (花園口) in an attempt to create a scorched-earth policy to halt the Japanese advance. However, this had little effect and resulted in the loss of ninety thousand lives due to flooding. Following the Huayuankow Incident, the Japanese army continued its offensive into Anhui province (安徽省), capturing much of it by the end of the month. Meanwhile, battles raged between the Japanese and Nationalist forces in Wuhan (武漢), where the Nationalist government had prepared defensive fortifications since late 1937, preventing the Japanese from capturing the city for several months. Consequently, the Japanese decided to open a new front elsewhere.
On March 30th, 1940, with Japanese support, collaborationist Wang Ching-wei established the Reorganised National Government of the Republic of China, alongside the collaborationist Kuomintang in Nanking, and claimed legitimacy as the rightful successor to Sun Yat-sen. It adopted the "Blue sky, white sun, red earth" (青天白日滿地紅) flag with an added yellow ribbon bearing the inscription "Peaceful Anti-Communist Statehood" (和平反共建國). Since Chiang's government, now based in Chungking (重慶) also claimed legitimacy, Wang's regime was often referred to as the "Nanking government" or "Collaborationist China".
Various puppet regimes established by Japan in 1937 and 1938 were nominally integrated into Wang Ching-wei's government. The armies of those puppet regimes were also absorbed into the newly formed Collaborationist Chinese Army (和平建國軍). However, since Japan did not fully trust Wang, the North China Political Council (華北政務委員會), commanded by the Japanese Army, was established to retain control over Hopei (河北) and Shansi (山西).
Meanwhile, on the other side of the globe, the Soviet Union, after a bitter struggle, emerged victorious in the Winter War with Finland, signing the Moscow Peace Treaty on March 12th, forcing Finland to cede Karelia, Salla, and Petsamo. In early April, Germany launched a new offensive, invading Norway and Denmark, both neutral countries. Denmark surrendered after a few hours of resistance; Oslo, the capital of Norway, fell within a month. Only then did Britain and France realize that continued appeasement would allow Germany to expand further, but it was far too late.
On May 10th, Germany invaded Belgium, the Netherlands, and Luxembourg. Neville Chamberlain, the British PM, resigned on the same day of the invasion in the face of public disappointment. Winston Churchill, also a Conservative, soon took on the role. After the German invasion of the Benelux countries, bypassing the heavily fortified Maginot Line, and attacking the weak spot of the French defense through the Ardennes. Thus, the Maginot Line was ineffective against the German war machine, and France surrendered on June 22nd after only a month of the initial invasion.
Charles de Gaulle, a colonel at the time, fled to London overnight and established the Free French government. After France had capitulated, the collaborationist Philippe Pétain established the French State (État français), becoming merely a German puppet state. Alsace-Lorraine and the southeastern borderlands were also forced to be ceded Germany and Italy respectively.
In order to prevent key territories from falling into enemy hands, Britain took over France's colonies in the Pacific, and were soon transferred to Free France. On the other hand, seeing France surrender, the Soviet Union launched military operations on the Baltic states, which were completely annexed by the end of September 1940.
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