Heavenly Kingdom of Nandi
First flag contest I've entered (that I remember, since coming back at least), with something simple, though the scenario is quite complex. In this world Imperial China maintained pace with Western development, to a degree. By 1900 the Qing could be said to fill the roll that Russia did IOTL. Colonial ambitions reached to Siberia, Japan, Southeast Asia, and even Australia and New Zealand. However, domestically, many groups like the Japanese did not mesh well with the fabric of the Empire, and the quality of life of the Chinese farmer and worker was seriously lacking. It was not long into the 20th Century before China saw the first revolution of this TL's communist movement.
The revolution would eventually succeed on the mainland, in short order too, and many regions such as Japan and Vietnam were quick to reassert independence. However, in areas such as Nandi (Australia) and New Shanxi (New Zealand) the Imperial government held on because settlers had overtaken the native populations in these regions. The Emperor did his best to hold on, and while Nandi and New Shanxi provided a large enough base to hold onto a few island bases on the way to China, there combined population base wasn't enough to seriously entertain any thought of retaking China proper, much less from a popular regime. As the status quo maintained for roughly a decade, the Regional Autonomous Assembly of Nandi, a necessary measure to keep local colonists happy during the turmoil, took drastic measures and declared formal independence for Nandi. A movement had originally formed for total peace, with the intention of New Shanxi and the other outlying holdings joining in some form of Imperial Federation, but Imperial support in New Shanxi was too high. Nandi represented 75% of the population, so while the remnant Imperial government could not do anything about the unilateral action, the Emperor formally considered the establishment of the constitutional Heavenly Kingdom of Nandi to be yet another rebellion.
The national mindset of Nandi is complicated, yet in other ways straight forward, and this is reflected in the national flag. Nandi does not deny it's heritage, and indeed, while support for the independence move was very high, the people still weep for the loss of glory that was the Imperial era. Only 100 years before the thought process of independence would almost be blasphemous, to use religious terminology, but to deny the geopolitical reality of the mid 20th century was likewise foolhardy. The pale yellow represents the old flag, slightly tarnished, but still strong. The two black stripes in the middle represent the ocean separating Nandi from the homeland, along with the myriad of former Imperial holdings in the middle that have now been left to their own devices through diverse fates. The white stripe at the top of the flag represents the shining glory of the old order, and the red the stripe at the bottom Nandi, for both the conflict that shaped independence and the general hot and desert conditions fitting well with the traditional color of fire.
There was great debate about the inclusion of monarchist symbols, and indeed the form of government was of great debate itself in the early years. Due to the Imperial family's obvious position that did not support Nandi's independence the new government could not simply keep the same rulers. Indeed, independence was an acknowledgement that the Qing had lost the mandate of heaven. Nandi would give a new mandate to the family of the Governor, who had up until this time ruled quite fairly within the province. While some would have argued that the new Royal family should have extensive powers fitting with tradition, the dissolution of the Qing was a strong point that the old ways no longer worked, and cues were taken from the stable constitutional empires of the West, such as the United Kingdom. The lack of monarchist symbols has sometimes been attributed to the lack of such symbols in the modern flags of the West.