War between Japan and the Nationalist Chinese really wasn't in either party's interest when it broke out. The Nationalist Chinese had a full plate of enemies with the warlords and Communists. The Japanese had plenty of enemies too, with the Soviets getting stronger in the Far East, a buildup that would eventually turn the balance of power against the Japanese in Manchuria.
Both sides went into the war partly because of illusions. There was a strain of thought among the Nationalist Chinese that said that if they fought back against the Japanese, the western powers would intervene. There was a strain of thought among the Japanese that defeating the Nationalists would be as easy as defeating the various warlord armies had been. Both strains of thought were clearly and obviously wrong, and it should have been obvious to the participants that they were wrong.
The challenge: how do you keep the Chinese and Japanese from full-scale war until at least 1940, and what would consequences be? I have some ideas on both fronts, but would love to see what you think.