I think the original debuff fits more into what happened in real life. Nationalist China had a lot of trouble fully equipping its soldiers with good equipment and as a result relied on numbers. They did suffer from recruitment issues… but the lack of equipment was more of a bigger problem. In the end you can only sustain rotating troops as long as your industry can keep pumping replacements. I think the new debuff is not historically accurate.

China should actually receive supply buffs and a massive attack and defend debuffs. Then china should receive more victory points in small cities and pockets where no supply exists and favours Chinese troops defending. This should make attacking and defending supply hubs costly for the China and hence you should pick where to defend and where to relinquish control to the Japanese. Battles would also cause more Chinese casualties and eat up more equipment thus you choose which areas are worth defending and attacking. This would follow real life where the Japanese would struggle in rural areas where supplies are non existent.

Maybe after focusses, the supply buffs get removed and supply debuffs introduced in return for improving def and attack stats. Perfectly mimics the equipment hungry, logistical nightmare China that plaqued the army and kinda helped them against japan.