USS Panay

The second USS Panay (PR–5) was a U.S. Navy river gunboat that served on the Yangtze Patrol in China until it was sunk by Japanese aircraft on December 12, 1937. The U.S. and Japan were not at war at the time. Japan took responsibility, claiming that they did not see the American flags on the ship's deck, and believe it to be a Chinese ship, with whom Japan was unofficially at war. The so-called Panay Incident was a step towards war between the U.S. and Japan.

USS Panay in The War That Came Early
The sinking of the USS Panay had happened less than a year before the outbreak of the war in Europe. While that war did not immediately impact U.S. interests, the tensions between the U.S. and Japan could be felt in occupied-Peking, and the sinking of the Panay was still a sore-spot for U.S. military personnel stationed there.