Yeah, I have considered that rule a little unrealistic. Say China has 15 IPCs at the start of a turn so they buy 5 infantry. They attack a Japanese held territory and conquer it. Now they can place those 5 guys on the newly conquered territory. I mean, they just took this territory, and suddenly they have 5 new infantry to defend it along with whatever survived the attack. That can make things very hard for Japan, especially if they are deploying resources elsewhere (DEI, India, vs US Navy, etc.)
Still, I suppose that rule makes up for China only being allowed to buy infantry and artillery (if the Burma Road is open). It really sucks as China when you lose that 1 precious fighter. I have seen games where Japan will deliberately send several planes just to take out that Chinese fighter.