The problem with the Japanese is that quite frankly they had no means to pursue a long, intensive war, especially without access to Western resources. The poor logistical infrastructure of China also rendered it extremely difficult to attack, as the Japanese did not have the mechanized support necessary to support deep in-land operations. Japan's greatest successes were in controlling the areas near the coast, which did indeed have a large amount of China's population and industry, but the Chinese had already successfully evacuated a significant amount of industry deep into the interior of China near the wartime capital Chungking. Attempted Japanese pushes deeper into China, such as near Changsha, were repulsed several times with heavy losses. The only way for Japan to achieve a victory in China was by concentrating large amounts of supplies, troops, and of course tanks and armor in a single area as they did with Operation Ichi-Go. However, while they were able to successfully capture Changsha during Ichi-Go in 1944, they attritioned away the bulk of their remaining combat strength in the area and much of the valuable supplies, such as high caliber shells, motor oil, and even replacements that were consumed were irreplaceable due to the Allied bombing and anti-shipping campaigns.

On the other hand, the Chinese, while politically fractured, had somewhat unified around Chiang Kai-Shek and his Kuomintang government. Chiang decided that the best course of action to end the Japanese invasion of China was by getting the West involved. This led to his rather questionable decision to commit his best German-trained troops into an urban grindfest at Shanghai. In a sense, however, he was correct in his assessment that the Allies would intervene eventually: the US embargo made the Japanese situation in China extremely tenuous. Japan could not withdraw from China due to political reasons that essentially made a coup d'etat likely in the event of anything other than a total Japanese victory. In effect, time was on Chiang's side, and he knew that all he needed was to hold out long enough for the US to get involved in the war. Since the Japanese were unwilling to settle for anything less than a total victory, the two sides were rather irreconcilable.

I talk more about the foreign support of China here