The victories of Japan over China were beyond impressive, way, way better than Nazi Germany victories in the Soviet Union.
They captured the capital, nearly all important cities, won victory after victory and captured the Wuhan which was the political, economic and military core of China.
Yet Chiang still refused to ask for terms. Why? What would it has taken for Japan to win?
As a side note, various Chinese factions did sue for peace. In addition to the most famous (or infamous) puppet government and associated army in Manchuria, the Japanese sponsored at least two other large scale Vlasov type armies.
These armies consisted of warlord troops and even nationalist aligned units whose commanders had personal disputes with Chiang, opposed his scorched earth tactics (though Chiang's orders made military sense, they had little regard for the suffering of millions of Chinese peasants), or whose commanders had concluded that there was no military solution to the war and that further resistance was disproportionately destroying China.
Others felt that Chinese communists were the larger threat. Though these Vlasov troops were usually not willing to fight offensively, they were willing perform limited front line defensive duties and internal security functions etc.
Also, though Chiang did refuse to discuss peace terms with the Japanese, he was not against implementing mutually beneficial local "gentleman's agreements" with the Japanese regarding military operations. U.S. advisors and observers noted that Chiang seemed to be preserving most of his troops and most of the U.S. military aid for the post war showdown with the Communists. Thus, Chiang could be slow to take the offensive against Japanese units that were still functioning.