The US is still very supportive of China (the US had a strong domestic lobby in support of China) even if Japan stays out of the European war, so expect tensions to still escalate (and certainly enough that the Allies are not going to tick off the US by embracing Japan). And Japan wasn't in good odor with the UK or France either.
On the other hand, if they don't put an embargo on oil (OTL triggered by the occupation of French Indochina, which clearly doesn't happen here), then Japan doesn't find itself needing to invade the DEI in order to secure its oil supply. It's likely that Japan eventually crosses some red line and the sanctions get imposed, but that will be significantly later. Meanwhile, the Army continues flailing about in the endless quagmire that is China (while the KMT is getting increasing foreign support, especially since the Burma Road isn't closed ITTL).
my take is China will lose, unless US keeps providing unlimited free aid. Japan is also draining money but their cities ain't occupied.
But trade goes both ways. China keeps getting their equipment, Japan keeps getting their US oil. Just don't know how China will keep getting their money with no way to get tax from their cash cow cities.
Does anyone have any recorded funding of the Chinese or are these written off as give aways?