After the July 7th Incident, the KMT authorities formulated plans for guiding the war effort. On August 20, the National Government issued a plan of guidance for the war, deciding on the adoption of a strategy of sustained attrition in what would be a protracted war of resistance.

The KMT regarded sustained attrition as the ultimate strategy. The basic idea was that "by making use of China's enormous manpower and vast land, we should choose to fight a protracted war of attrition, on the one hand wearing down the enemy, and on the other, building up China's own strength. We should wait for the right opportunity to launch an offensive to destroy the enemy and secure victory."

The main substance of the strategy included:

i) putting into action the notion of "trading space for time," which was argued to be the essence of the strategy of sustained attrition;

ii) putting into effect the principle that "the purpose of attrition warfare is to constantly maintain the fighting capacity of our own armed forces while at the same time wearing down the enemy's strength as much as possible so that our own forces can resist the enemy for a long time";

iii) and employing a firm defense on the interior line with dispersed forces defending all important positions on the understanding that because the strengths of the Japanese forces lay in its aircraft, artillery, and tanks while that of the Chinese forces was in their deep trenches, high fortresses, and thick walls, the way to win in resistance was to "firmly defend positions and never retreat," and "deploy forces on all lines and defend all positions."

At the same time, the strategy also incorporated relying on intervention by a third country and international diplomacy to curb Japanese aggression.