The overall military position of the National Government has deteriorated in the past several months and the current military situation favors Communist forces. The Generalissimo has never wavered in his contention that he is fighting for national independence against forces of an armed rebellion nor has he been completely convinced that the Communist problem can be resolved except by force of arms. Although the Nationalist Army has a preponderance of force, the tactical initiative rests with the Communists. Their hit-and-run tactics, adapted to their mission of destruction at points or in areas of their own selection, give them a decided advantage over Nationalists, who must defend many critical areas including connecting lines of communication. Obviously large numbers of Nationalist troops involved in such defensive roles are immobilized whereas Communist tactics permit almost complete freedom of action. The Nationalists’ position is precarious in Manchuria, where they occupy only a slender finger of territory. Their control is strongly disputed in Shantung and Hopei Provinces where the Communists make frequent dislocating attacks against isolated garrisons. In order to improve materially the current military situation, the Nationalist forces must first stabilize the fronts and then regain the initiative. Further, since the government is supporting the civil war with approximately seventy per cent of its national budget, it is evident that steps taken to alleviate the situation must point toward an improvement in the effectiveness of the armed forces with a concomitant program of social, political and economic reforms, including a decrease in the size of the military establishment. Whereas some rather ineffective steps have been taken to reorganize and revitalize the command structure, and more sweeping reforms are projected, the effectiveness of the Nationalist Army requires a sound program of equipment and improved logistical support. The present industrial potential of China is inadequate to support military forces effectively. Chinese forces under present conditions cannot cope successfully with internal strife or fulfill China’s obligations as a member of the family of nations. Hence outside aid, in the form of munitions (most urgently ammunition) and technical assistance, is essential before any plan of operations can be undertaken with a reasonable prospect of success. Military advice is now available to the Nationalists on a General Staff level through American military advisory groups. The Generalissimo expressed to me repeatedly a strong desire to have this advice and supervision extended in scope to include field forces, training centers and particularly logistical agencies.