By the last half of 1948 it was clear that the GMD was going to lose the Civil War. Apart from those who believed in Marxism and were convinced that the CCP was destined for victory, the supporters of the GMD were losing hope. The GMD armies had lost the initiative. The GMD was still strong, in military terms, and it controlled an enormous government and political apparatus. It was recognised by all major foreign states and was a major international player. As one of the victorious allies in the Second World War, China was a key member of the body that was to guarantee future world peace, the United Nations. China sent a team to the 1948 Olympic Games in London. There were no medals, but the few athletes were described as ‘beaten but not disgraced’.

And yet deep within the GMD people felt the end was near. The American diplomat John Melby noted the feeling, almost of panic, that gripped the GMD world: ‘Nanking and Shanghai are tense to the point of panic and there is still no food. Never have I seen anything like the emptiness of the stores and the lines of people hoping that something, anything will come in. In China now, where events usually move slowly, everything is moving at a fearful rate.’

In the GMD military there was something close to despair about the worsening military situation. Chiang Kai-shek was intent on pursuing his own, costly strategies, concentrating huge forces in the north. He refused to let the best GMD commanders, notably Bai Chongxi, play any significant role in the grand strategy. Chiang's stubbornness was his (temporary) downfall. He lost so much support within the GMD that in January 1949 he was forced into ‘retirement’; vice-president Li Zongren took over as acting president.