Japan didn't have any ultimate plans for China, simply put.

The initial onset of the Second Sino-Japanese War is generally considered to be the Marco Polo Bridge incident. However, this incident was tempered by diplomatic talks between China and Japan seeking to calm the situation, which were frustrated by Japanese militarists who demanded to be allowed to "punish the Chinese insolence" and Chinese revanchists who wanted to retake historical Chinese territories including the Japanese concession in Shanghai. After a Japanese officer was shot in Shanghai, commencing the Battle of Shanghai, the war broke out in earnest.

The initial Japanese plan was to launch a two pronged assault, with the North China Army seizing Beiping (today Beijing) and proceeding south to meetup with troops landing in Jiangsu province around Shanghai, which would drive to the capital, Nanjing. The idea was that the capture of Nanjing would force a Chinese surrender, and that Japan would be able to likely gain some territorial concessions out of it-for instance, Shandong/Qingdao, a concession that Japan had looked to keep after seizing it from the German Empire in World War I.

However, Chiang Kai-Shek had a very different idea in mind. He knew that the US, UK, and Soviet Union were afraid of rising Japanese expansionism. He believed that if he could hold off the Japanese long enough, and made a favorable impression on the West, they would intervene in the war, which would buy China time to rearm and reindustrialize, and for him to finish crushing the Communists. To that end, he deployed most of his best troops-German trained and equipped-to Shanghai, in the hopes that the foreigners in the concessions would make enough of a impression on their governments to interfere with Japan's attack.

The end result was what was envisioned to be a two week operation to seize Nanjing ended up being a month long urban struggle over Shanghai with extremely heavy casualties on all sides. While Chiang's elite units were decimated, they had brought precious time for China-namely, significant war industries were moved from areas under threat to Chongqing and deep into China, away from the Japanese forces. As a result, even with the capture of Nanjing, Chiang was perfectly willing to bog down Japanese troops-for instance, a controversial decision to flood the Yellow River Plain-until the West intervened. At this point, the Japanese decided that Chiang was unwilling to surrender, and so in 1940 they established several puppet regimes, including Mengkekuo (Mongolia Country) and the "Reorganized National Government," a puppet government claiming to be the legitimate government of China, which was led by Wang Jingwei, who was widely seen as a traitor. Presumably, a Japanese victory would have led to this puppet being installed as the one Chinese government, as well as other areas of China being balkanized much like Manchukuo and Mengkekuo.

Sources:

Harmsen, Stalingrad on the Yangtze: the Battle for Shanghai

Taylor, The Generalissimo: Chiang Kai-Shek and the Struggle for Modern China

Saburo, The Pacific War