The 129th Division drove deep into the rear of the Japanese-occupied areas, established itself in the Tailing Mountains and spread out towards the plains. Bordering on the three provinces of Shanxi, Hebei and Henan, this mountain range, known in ancient times as " the ridge of the earth", had long been a strategic region contested by rival armies in north China. High and perilous, it was easy to defend but difficult to attack. After consolidating their positions in the Tailing Mountains, Deng Xiaoping and Liu Bocheng divided their troops into small detachments to mobilize the masses, organize anti-Japanese armed forces and set up local democratic governments. Having established an anti-Japanese base in the Shanxi-Hebei-Henan border area, they led their troops east across the Beiping-Hankou Railway into the southern Hebei plains, where they established the Southern Hebei Anti-Japanese Base Area. At the same time they set up the Taiyue and Hebei-Shangdong-Henan base areas.

When the war entered a stalemate, changes took place within the anti-Japanese camp. Some diehard reactionaries in the Kuomintang began to create friction behind enemy lines, attacking Eighth Route Army encampments and killing officers and men. The Eighth Route Army was this placed in the dangerous position of being caught between two fires. In December 1939 the Kuomintang diehards launched the first anti-Communist onslaught: the troops under Zhu Huaibing, commander of the Kuomintang's 97th Army, mounted large-scale offensive against the Taihang Mountain region where the General headquarters of the Eighth Route Army and the 129th division were located. In March 1940, driven beyond the limits of forbearance, Liu Bocheng and Deng Xiaoping ordered their troops to rise in counter-attack, and in four days of fighting and with co-ordinated efforts of the troops from the Shanxi-Qahar-Hebei Military Command, they wiped out Zhu Huaibing's whole army and a number of miscellaneous troops. or a total of 10,000 men. The defeat of this Kuomintang onslaught enabled the Eighth Route Army to concentrate on fighting the Japanese aggressors and building up its base areas in the enemy's rear. Beginning in August 1940, liu and Deng, with 38 regiments under their command (not including local forces), participated in the" Hundred- Regiment Campaign". Fighting 529 operations, big and small, they dealt heavy blows to the Japanese and puppet troops and greatly strengthened the whole nation's confidence in victory.

In 1941 the war of resistance behind enemy lines in north China entered the most difficult stage, when the Japanese troops concentrated their attacks on the rear. They launched a campaign to "tighten public security" there, adopted a "burn all, kill all, loot all" policy and built a network of blockhouses to encircle the army and people of the base areas. For several years on end the enemy's incessant "mopping-up" operations, together with natural calamities, placed the base areas in an extremely difficult position. In September 1942, in addition to his post of Political Commissar of the 129th Division, Deng was appointed Secretary of the Taihang sub-Bureau of the Central Committee of the Communist Party. In October 1943, when Peng dehuai, Acting Secretary of the Northern Bureau of the Central Committee, and Liu Bocheng returned to Yan'an to tale part in the Party's rectification movements, Deng replaced Peng as Acting Secretary. In that capacity he was in charge of the work of the General Headquarters of the Eighth Route Army and bore responsibility for leading the struggle of the army and people in the base areas behind enemy lines. Employing the tactic of advancing when the enemy advanced, he launched guerrilla operations against the enemy-occupied areas and especially against communication lines. Under his command the army smashed a series of ruthless "mopping-up" operations by the Japanese and puppet troops. He led the army and the people of the whole region in successful efforts to build up Party organizations, armed units and local governments, to conduct a Party rectification movement, to secure fewer and better troops and simpler administration, to reduce rents and interest rates and to launch a large-scale production campaign.