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The Viets are incredibly tough. They do rally and keep coming on through the slaughter, but in this instance they did not stand a chance. What I personally need to improve a bit it my skill at laying mines and Barbed Wire, I never tried that before really.
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the viets retreat/disperse normally for me. maybe you accidentally set morale really high. either that or the sheer mass of them with overlapping unit HQs gives them good rally.
there's also a selection bias at work here, the only units which you come into contact with are the extremely high command rating ones that survived your artillery bombardment.