Re: Chinese manufacturing capacity
The Chinese seem to have been able to manufacture most types of field/mountain guns around 75mm, antitank guns, mortars, the occasional heavier piece (e.g., 120mm guns, 150mm howitzers), gas masks, grenades & rifle grenades, land mines, optical instruments, some aerial bombs, and firearms, albeit not always in the numbers they wanted. They also seem to have crudely converted some regular vehicles into armored cars. They couldn't produce decent fighters (and they did try), and I don't know of any attempts at tanks
China usually needed to rely on foreign sources for the machines used to create these weapons, though, so if the Brits want the Chinese to manufacture (e.g.) 25 pounders, they'll have to ship over the factory equipment. As a result, China's arms industry sometimes built a variety of random stuff that they'd bought the factory equipment for over the previous few decades, with pre-WW1 rifle designs serving alongside much more modern gear.
Since China had poor roads and the military even lacked lots of pack horses, this limited production repertoire didn't cripple the Chinese as much as it would have crippled an army in Europe or North Africa, where mechanization would have been a higher priority. China was fortunate that its poor terrain was somewhat compatible with its arms industry's limits.
They are definitely able to start building the nucleus of an aircraft industry by *assembling* foreign built aircraft designs on site, like the Turks did with the Polish PZL P24 fighter. (The Turks *might* have been able to manufacture P24s on their own, based on one of the sources I've seen, but I wouldn't count on it. Even the Argentines were only able to make domestic designs like the "Bombi" in tiny numbers.) Even with the P24, though, it was not one of the most advanced designs on offer in 1938, but it likely would have been within Chinese technical abilities to *assemble* them from imported parts.
The Chinese did actually start assembling American planes in their plants as well, but the war kept moving production around. The Chinese assembled Hawk III biplanes in some numbers, I think, and probably some H75Qs, and Curtiss-Wright CW21 interceptors. They were presumably confident enough in their ability to piece foreign fighters together from predesigned kits. Like some South American and Baltic countries, the Chinese probably could develop the ability to make domestically produced trainers, but not necessarily top shelf fighters.
Now, a couple interesting wrinkles appear in plane design. First, the Chinese tried to hire out an air force not only from "volunteer" Americans, but also "volunteer" Soviets. So the Soviets might be fighting alongside the British and Germans, oddly enough. Second, the Chinese had started buying
Gloster Gladiators in the late 30s, before the British needed every plane they had against Germany. Those worked decently. In this timeline, the British might give them more, and maybe help them set up assembly plants. Those would end up getting slapped down by the Zeros eventually, though.