By the mid-1930s, however, Lianhua's fortunes had declined, as the war with the Japanese took its toll on both the company and the city. Japanese bombardment destroyed numerous Lianhua holdings including its Studio No. 4, and soon the company was losing money with each film produced. By 1936, Luo had left Lianhua's management, and Li Minwei had reformed Minxin as an independent studio using Lianhua's Studio No. 1. When the Nationalist forces withdrew from Shanghai in late 1937, it signaled the final collapse of the company. By the end of the war, Lianhua had generally been supplanted by other film companies, notably the Xinhua Film Company.