During the Spring and Autumn period, the states of Jin and Chu constantly sought opportunities to attack each other in their rivalry for supremacy. In 597 BCE, the two states clashed in the Battle of Bi (near present-day Zhengzhou, Henan).
During the Spring and Autumn period, the small state of Zheng, caught between the powerful states of Jin and Chu, first allied with Jin. King Zhuang of Chu then besieged Zheng. The Jin ruler sent generals Xun Linfu, Xian Hu, and Shi Hui with troops, ostensibly to aid Zheng but actually to force a decisive battle with Chu. When the Jin army reached the Yellow River, they learned that Chu and Zheng had already made peace. Marshal Xun Linfu proposed retreating and waiting for the Chu army to leave before attacking Zheng. Minister Shi Hui agreed, saying, "Advancing when victory is possible and retreating when difficulties arise is the wise policy for an army. Attacking the weak and punishing the reckless is the proper strategy for war." He argued that Chu was currently strong and without internal strife, so retreat was best. However, Xian Hu objected, declaring, "Seeing a strong opponent and wanting to retreat is not what a commander should do." Defying orders, he led his own troops across the river. Faced with this, Xun Linfu was forced to order the entire army to cross and engage Chu at Bi. There, under the command of Sunshu Ao, the Chu army caught the Jin forces off guard and routed them completely.
"Knowing difficulties and retreating" originally referred to adapting tactics in battle and not forcing the impossible. Now it commonly describes shrinking back at the sight of difficulty, lacking the courage to overcome it.
Source: *Zuo Zhuan*, "Duke Xuan's Twelfth Year"
Meaning of the Idiom: Later, the Chinese idiom "知难而退" came to describe how shrinking back at the sight of difficulty, lacking the courage to overcome it.