The split between the Communists and Nationalists occurred in 1927. After the earlier revolution back in 1911, China attempted to form a government under Yuan Shikai, who later tried to have himself crowned emperor. When Yuan died in 1916 after his aborted attempt to become emperor, no single unifying personality was left so the country broke down to a warlord dominated form of rule which lasted until 1928. Incidentally, one of the warlords attempted to reinstall Pu-Yi (last Manchu emperor) back to the throne in 1917, but was eventually rejected by other warlords.
I guess the movie setting in 1926 involves the Imperialists backing the warlord government (Beiyang government) after Yuan's death. There were anti-imperialist demonstrations going on in March 1926 and a massacre occurred on March 18. Those involved in the demonstrations were hunted down (both Nationalists and Communists). The demonstrations came about after a Japanese warship was fired upon from a Chinese fort on March 12. The Japanese said the attack violated the Boxer Protocol of 1900 and demanded that the fort's defenses be destroyed. This then created anger about the unequal treaties between China and the foreign powers. I guess the civil war going on is referring to the constant warlord battles as well as the growing numbers of people either allied with the Communists or Nationalists. The San Pablo is "protecting" the US interests in China. I believe the term "gunboat diplomacy" is derived from ships like the San Pablo.
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