Thanks for asking this question and giving me a little early morning mystery to solve!

Maps can be tricky, especially when they consist only of an image and color with no additional information. Mapping the Sino-Japanese War, a conflict that took place from 1937 to 1945 and consisted of multiple offenses, retreats, and consolidations at different times, is especially difficult. Many maps simply reduce the detail and show approximate areas of Japanese occupation, and even ones that attempt to denote changes in territorial conquest over time don’t always show an enclave or surrounded territory in this area. So identification was the first task.

The best option in a situation like this is to go to a reliable historical source. In this case, I had Keith Schoppa’s Revolution and Its Past: Identities and Change in Modern China (3rd ed) handy, which is a great textbook overview of events and contains a high level of detail. Based on the map and narrative in Schoppa’s book, my best guess is that the grey area in the middle of the red blob refers to the interior of areas between Nanjing, Shanghai, Wuhan/Hankou, and Nanchang that center of Anhui and Jiangxi provinces. You can see a map indicating this area here.

This little bubble of territory seems to have been created by the patchwork conquest of North and Central China. Nanjing and Shanghai were captured at the outset of the invasion of the mainland in 1937, forcing Chiang Kai-shek’s government to re-organize in Chongqing, and splitting the country into three main power bases: the Nationalist Guomindang in the southwest, the Communists in northern Yan’an, and the Japanese in Manchuria, central China, and the eastern coast. A year later, Hankou was captured by the Imperial Japanese Army in the battle of Wuhan after four months of grueling combat, which extended Japanese control south.

Wuhan was one of the bloodiest and most consequential battles of the war. The Nationalist army intentionally flooded the Yellow River to slow the Japanese advance, causing widespread suffering and killing anywhere from half a million to a million civilians, but even this desperate effort was unsuccessful. In the aftermath, both sides were exhausted and did not seek out any further major engagements until the end of the war. The capture of Nanchang in August 1942 was a rare large-scale battle at the time, and the casualties suffered on both sides paled in comparison to Wuhan. With Nanchang, the “bubble” you’re referring to seems to have been created, as the Japanese extended control along the railway line between Nanchang and Hankou, but not throughout the territory.

Why did they not push further? The Japanese were both unwilling and unable to extend control over the greater part of these interiors for much of the war, due to stiff resistance and logistical difficulties. As mentioned, the IJA was exhausted and seriously damaged after the battle of Wuhan, and settled in to consolidate the territory it already controlled – approximately 10% of the land area of North/Central China, mostly centered around cities and rail lines. Schoppa also notes that “the army in Central China did not emphasize pacification to the degree that the northern army did” and that it was mainly a policy around Shanghai, Hangzhou, and Nanjing – just north of the area in question. Japanese military objectives in this area were limited throughout the early 1940s to specific strategic objectives; for example, the seizing of Yichang in 1940 to cut off trade to Chongqing, and a series of offenses in southern Zhejiang and northern Jiangxi to destroy remaining airbases that could be used as landing sites for bombing raids on the Japanese islands.

(Note that these airbases could still be used by the Nationalists DESPITE being in the middle of Japanese conquered territory, and the Japanese chose to destroy them rather than repurpose them - that shows just how disinterested and/or unable they were to establish permanent bases in these areas.)

The main reason you haven’t heard much about it is that it was not particularly consequential. It wasn’t controlled by a dominant local faction or leader from what I can tell. I can’t find too much specific information about what happened in this area during that time – perhaps someone else may be able to dig up something in a more specialized book – but if I had to hazard a guess, I’d say that for many, life simply went on. Depending on proximity to Japanese forces, Chinese peasants might resist, collaborate, or openly rebel, but they also might continue their lives in relative indifference, especially if they lived in inaccessible, economically unproductive, or strategically unimportant areas. That being said, the invasion caused massive hardship throughout the countryside, and undoubtedly still affected those who lived in this “bubble” as well. Although not directly controlled, they would still suffer from economic disruption and the general impact of war – refugees, social violence, skirmishes, and occasional armed attempts to extract supplies, funds, or taxes by both the Japanese and the Nationalist troops.

Sources:

Schoppa, Keith. Revolution and Its Past: Identities and Change in Modern Chinese History (3rd ed, 2011)