The Chinese treated all POWs the same regardless of rank. This resulted in the degradation of discipline among POWs. Do you think this was the intended outcome or just 2nd and 3rd order effects? In addition what would you do to combat the loss of morale among POWs?

This was not the intended outcome. The Chinese  initially did not recognize the Geneva Conventions. This allowed them to follow their own policy for POWs that saw a difference between prisoners who surrendered and who were captured.

I do not believe you can ever completely prevent the loss of morale among POWs. The best thing you can do is to provide Soldiers a clear understanding of what they are fighting for. The more buy in that Soldiers have on their operation the more likely they are to maintain their discipline and morale during the hard times.