By this time, he seemed to have gradually lost his military prowess, and the Imperial Japanese Army easily overwhelmed his forces and broke through the Chinese defensive lines despite being greatly outnumbered.

Liu was forced to abandon much of Hebei province in North China and this defeat contributed to the 1938 Yellow River flood, after which he was relieved from his posts by Chiang.

When the Campaign of the North China Plain Pocket broke out in the summer of 1946, he failed to destroy the Communist forces (PLA) under Marshal Liu Bocheng and Deng Xiaoping and was relieved of his command yet again.

Although President Chiang Kai-shek again dispatched Lieutenant General Du Yuming to save the situation, Liu's ineffective leadership and timidness had already doomed the KMT position in Central China.

When the Communist forces finally defeated the nationalist troops the next year and deputy commander-in-chief Du Yuming was captured, Liu was reliefed by Chiang Kai-shek, who was fortunate to escape Xuzhou via a plane.

General Liu Zhi's early military career was full of victories and successes, but he lost his aggressiveness in combat skills after the outbreak of the Second Sino-Japanese War.