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Network coding has been known as a spectrally efficient technique in wireless networks. However, when it is applied to a two-way relay channel (TWRC), it suffers from performance degradation caused by the asymmetric position of the relay. In this paper, we suggest remedying this problem by using hierarchical modulation at the source node. We investigate how hierarchical modulation can be incorporated and optimized with network coding. Our results are encouraging in that hierarchically modulated network coding (HMNC) significantly improves end-to-end bit-error probability and spectral efficiency in asymmetric relay channels, as compared with direct transmission (DT), bidirectional network coding (BNC), and coded bidirectional relay (CBR).