With a strength of about 2.5 million personnel, the People's Liberation Army is the world's largest military machine. But while it is bigger than any Western army - including that of the US - in manpower, it lags far behind in the sophisticated equipment, technology, intelligence and skills required for modern warfare. The need to convert this gigantic institution into a leaner and more technologically advanced fighting force has long been recognised by the party leadership. Achieving that aim, however, presents huge challenges. The latest step towards modernising the military was announced on Monday: the slashing of PLA numbers by 200,000. This follows other cutbacks over the years which have gradually reduced the army from its 1949 peak of 5.5 million. A million jobs were shed in the late 1980s, and another 500,000 have gone since 1997. As the numbers fall, so should the bloated, bureaucratic structure of the PLA. And so, too, has its very nature been changing. With Deng Xiaoping's reforms of the 1980s, the PLA was able to acquire numerous commercial interests to support its dwindling budgets. It became more than just an armed force, with ownership in enterprises ranging from farms and factories to television studios and even karaoke bars. But under reforms initiated in the late 1990s by former president Jiang Zemin, who remains chairman of the Central Military Commission, the PLA has had to divest itself of these. The cutbacks have also spelled the end for many units that have little to do with defence. Following the disbandment of the soccer and swimming teams, we have learned that the song and dance troops are to be axed. Reducing the size of the military brings with it a lower wages bill. It should mean funds can be directed towards providing a better equipped, better trained, and more efficient fighting force. Most of the positions removed in the latest drive are expected to be from among the officers: as many as 200 generals and admirals could go. This should help the PLA devise a more effective command structure. The need to move away from the army's traditional reliance on weight of numbers and towards a strategy which uses modern equipment, tactics, and information technology has been recognised by the leadership since the first gulf war. The hi-tech American led invasion of Iraq this year, with its use of precision weapons, has only underlined that belief. It prompted Mr Jiang to say in June that the PLA should learn from the war by improving the quality and training of its soldiers. Attracting better educated candidates to its ranks will be required: it has been reported only two per cent of PLA personnel have advanced university degrees. Making soldiers' wages more comparable to those of similarly qualified civilians would help attract better recruits. While the leadership is clearly determined to steer the PLA in the right direction, numerous obstacles remain to be overcome. The first is vested interests, which are not inconsiderable given the PLA's central role in political life. A core group of senior officers clearly wish to professionalise the PLA and make it a tool of the state, but there are many who want it to remain a tool of the party. Then there is concern about laid-off soldiers adding to China's unemployment problem. Mr Hu called in June for government and party units to create jobs for demobilised soldiers. Many are moved into police and security positions, or to jobs with state-owned enterprises. But with both the state and SOEs cutting back themselves, this will not be easy to continue. Still, the transition of the PLA into an army fit for the modern era must be achieved, especially as China begins to play more of a role on the world stage. The latest cutbacks are a necessary part of what will undoubtedly be a long process.