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Two-way relaying is an efficient way to improve the network capacity significantly. Making use of the broadcast nature of the wireless network, physical-layer network coding (PLNC) has been evidently shown to improve the spectral efficiency further. However it has a poor performance at low SNR. In this paper, the three-node cooperative transmission is considered, where PLNC is used at the relay node. An adaptive transmission strategy is proposed to solve the issue. The transmission strategy, which is based on instantaneous channel quality, is selected to offer maximum total system capacity. The efficiency of the proposed solution is demonstrated by both analytical performance and simulations.