For a nation that managed to hold out virtually alone for years against Japan, China never has gotten much respect in any Axis & Allies game, whether it's a Larry Harris design or A&A miniatures.
A few months back I proposed a "100-point" standard game order of battle that I thought might be competitive against the 1939 Japanese. Constructed under the latest rules, using formations and fortification limits, single-army bonus and 1939 year restrictions, it looked like this: One KMT infantry company (1 KMT officer, 10 KMT riflemen, 1 KMT MG team) eight more KMT MG teams, 1 more officer and 1 more rifleman, 1 T-26 tank, a headquarters, a pill box, six barbed wire and four minefields for a total of 110 points. (In historical terms this is an infantry company, a machine gun company and a few supports)
It took a long time to get this to the table, but I finally got a chance to play it. I constructed the following Japanese force, which was not very exotic at all: Two Japanese infantry platoons (1 imperial sergeant, 5 Arisaka rifles, 1 knee mortar) two Type 89 Chi-Ro "medium" tanks, one imperial sniper, one MG team, 1 70mm gun, 1 SNLF Fanatic and a Zero for 110 points. The Japanese player was a total A&A newbie, although an experienced gamer.
We battled over Map No. 1 of the 3-inch hexes (village), with the Japanese starting on the more open side, while the Chinese had a bit more woods cover. The mines and wire were set up to force the Japanese into a narrow approach to the objective. Not that it made much difference.
The Japanese player made a straightforward, competent frontal assault with the sergeants and riflemen, accompanied by the tanks, while the mortars, machine gun, sniper and infantry gun provided covering fire. The Zero took pot shots at long range until the end game when most of the KMT machine guns were gone. KMT fire was reasonably effective and, if anything, the KMT made more than its share of cover rolls. The Japanese lost both tanks, the infantry gun and about 5 riflemen. The Chinese were wiped out to a man in five turns.
While I might try to tinker around the edges with this OB, perhaps subbing more pillboxes for the barbed wire and/ or mines, the Chinese have too limited a selection of units to be competitive right now. Unfortunately there's little historical basis for giving them much more. A cannon would be nice, and maybe some better quality infantry would help, but the main things that made China such a hard nut for Japan to crack are really outside the scope of a tactical wargame.