I think that the order of events was slightly different in 1937. China fought the Battle of Shanghai to try to provoke Western intervention. The Western response was the Nine Power Conference, which broke up on 24th November 1937 just as Japan won the Battle of Shanghai. At that point it should have become obvious that there would be no immediate Western intervention. Thus one of Japan's best chances for peace may have been the three weeks between 24th November and the Panay and Ladybird incidents on 12th December, which together with the atrocities following the fall of Nanking on the 13th renewed Chinese hopes of foreign intervention. Over that period, Germany offered to mediate but Japan did not quickly offer attractive terms.The best bet might be for a very early negotiated peace after the Marco Polo Bridge Incident. After that, both sides were far too committed to make peace. Japan needed substantial concessions, and Chiang could not give them to Japan and still keep power. After Battle of Shanghai, Chiang knew his best was to prolong the war until foreign powers intervened. There were people in China who wanted peace with Japan, but they were a clear minority. And if the war lasts until 1941, things will develop in our timeline. So I think there is a time period in 1937 where war might be averted.
.......
There is one other period that might have allowed a Japanese victory in China. After the German victories of May-June 1940, most of the Japanese Army and some of the Navy believed that Germany had won its war. Now almost everyone on this board believes that a successful Sealion required the intervention of alien space bats. Had the issue been explicitly discussed in a war game involving the IJA and IJN, the players might have come to the same conclusion. A less dysfunctional Japanese Government might then have asked how Japan could exploit the situation that actually existed rather than entering into negotiations with Germany.
Interestingly, they might have concluded that they would be able to campaign in China over at least the next year with no possibility of any other power seeking a conflict with Japan. This would allow them to redeploy their best troops from Manchuria into China below the Wall. They should also have concluded that there was no point in building a navy to prevent American intervention in China if they could not win the war even without American intervention. Thus they should have redirected resources from building warships to making trucks, river craft, rails and trains to support operations deep in China. Could Japan have taken Chongqing? Would that have won the war? Where would Chiang have gone if he intended to continue resistance? Might Wang Ching-wei's Government have gained sufficient prestige to enable its troops to free many Japanese from garrison duty?