The origins of Germany's alliance with China vs that of Japan go all the way back to the Weimar Republic era. In a sense, the German military, functioning semi-independently of the civilian government, established a relationship with China that continued in parallel with that of the Weimar government and later the Nazis. The choice between China and Japan came down to an irreconcilable conflict between these two interests.

In the wake of World War I, Germany had been diplomatically isolated as many of her former allies had collapsed in the post-war chaos and the Entente placed certain restrictions on Germany's diplomatic status, such as denying them entry into the League of Nations for several years. This period also saw the German military, the Reichswehr, becoming somewhat independent of the German civilian leadership, in what became known as the state-within-a-state.

During this period, China was fractured by warring regional warlords. One such faction, the Kuomintang, had developed a certain rapport with elements of the German Reichswehr. The Reichswehr saw this alliance as a way for the Germans to exert some foreign influence, especially after the loss of Germany's colonies. The Kuomintang were willing to ally with the Germans, as the loss of Germany's China colonies made them no longer an "imperialist" power, making the relationship one of equals and not of an imperial power vs. a colony. Germany officers, such as Hans von Seeckt (the head of the Reichswehr, who was forced to resign due to a scandal) came to China to begin reforming the Kuomintang army. Soon, German industrial interests, seeing the potential for the vast China market, started making moves to expand to China, although more often than not they bickered amongst each other and competed for space.

This alliance started to change with the rise of the Nazi Party in Germany. Hitler saw China as a potential ally in two respects: firstly, China's proximity to the Soviet Union made her a potential military ally, and secondly-and perhaps more critically-China's large amount of raw materials that were not contested by another European power were a resource Germany desperately needed to rearm, for instance, tungsten-or wolfram-was a major military and strategic resource that China had in spades.

To this end, Germany's military and economic interests in China-previously fractured-coalesced behind the banner of Hapro, a nominally private company that acted as Germany's facilitator in China. Germany made several agreements to sell arms and industrial equipment to China in exchange for China's vast raw materials. German military advisors led by Alexander von Falkenhausen created a plan to modernize China's industry and military by 1941. The Stahlhelm, the German helmet, became ubiquitous in China.

At the same time, Germany was approaching other countries for an alliance against the Soviet Union. Hitler's endgame was the conquest of the Russian lands, and he needed allies to do so. Thus the German courting of China, and also Japan.

Japan had extremely strong anti-communist tendencies. The conservative ruling class of Japan found communism to be anathema to everything Japanese, and went to great extremes to stamp it out, such as with the Peace Preservation Laws. Anti-western sentiment propped up in Japan, especially after what was perceived to be a series of betrayals by Japan's former ally Britain in the wake of WWI, such as the abrogation of the Anglo-Japanese alliance, the denial of the "racial equality clause," and the Washington Naval treaties. A rise in the political power of the Japanese military (which is explained excellently here) created a situation whereby the Japanese civilian government was essentially powerless to interfere with the military's actions. Interestingly, fascist elements-especially after a failed 1936 coup attempt-were stamped out.

All in all, the end result was a society that was extremely anti-Communist, anti-West, and heavily armed. It was only natural that despite German grievances about the Japanese seizure of Qingdao during World War I (which the Kaiser declared would be more offensive to German honor than to surrender Berlin to Russian troops), Hitler would approach Japan as an ally against the Soviet Union, which was solidified by the Anti-Comintern Pact in 1936.

The Chinese were also approached to sign the Anti-Comintern Pact as well. Chiang Kai-Shek and the Kuomintang were engaged in a struggle against the Chinese Communists, so it seemed that it was only natural for China to join. Japan hoped that this would also lead to Japan gaining greater influence over China as the two would be essentially aligned in a defensive treaty. However, due to the aforementioned coup attempt, Japan's government fell into chaos and the treaty was postponed, during which time Sino-Japanese relations further deteriorated.

At this point, there were two opposing factions in Germany. The Nazi faction, such as von Ribbentrop, wanted to support Japan over China, reasoning that if Japan controlled China then Germany would be able to benefit from being allied to Japan. The Wehrmacht (former Reichswehr), having had a successful relationship in China, wanted to stay allied to China instead. In the end, this caused the creation of several proposals to the anti-Comintern pact that antagonized the Japanese, including one proposal by the Germans for the Japanese to withdraw from Manchuria, which they had invaded in 1931. The result was an extremely water-downed treaty that essentially only loosely tied Germany and Japan, with China not signing at all.

In 1937, a series of border skirmishes resulting from the Marco Polo incident, where a Japanese force unilaterally invaded China without orders from the government, led to a rapidly escalating situation in China whereby Japan and China went to war in what became known as the Second Sino-Japanese war. While the German modernization plan was incomplete, the portions of the Chinese military that had been modernized significantly frustrated the Japanese assault, causing extremely heavy casualties during the Battle of Shanghai. This resulted in increasing diplomatic pressure by the Japanese to have Germany withdraw its aid to China lest Japan abrogate its obligations to Germany. This created a crisis among the German diplomatic corps, which, having tried to maintain an alliance with both China and Japan, now had to choose between one and the other. German attempts to intermediate a peace were frustrated by the fact that neither side was willing to make any concessions: the Chinese knew that world opinion and time was on their side, and the Japanese feared (rightly) civil unrest and a coup attempt should Japan end the war with anything less than total victory. Ultimately, Hitler picked Japan for the simple reason that Japan's military had already been developed: Hitler had been planning an invasion of the Soviet Union in the short-term, and China's military was still too backwards to truly be a threat for the Soviet Union. As a result, German advisors, despite their protests, were ordered back to Germany. While some of them made an oath to never assist the Japanese, at least some intelligence from the Germans made it back to Japan, resulting in an extremely damaging bombing campaign on the Chinese wartime capital, Chongqing.

Even still, however, there were efforts by both the pro-China elements of Germany and several Chinese senior officials to rekindle the relationship. Indeed, there seemed to be an opportunity to do so in 1939, when the Molotov-Ribbentrop Pact was signed. The Japanese were outraged by this pact as they not only thought it created a conflict with the Anti-Comintern Pact that was signed earlier, but it reminded them of the betrayals by other Western countries after WWI. Indeed, there were even attempts by the Japanese to cooperate with the Polish intelligence service as a potential hedge against this new pact. To mollify the Japanese, the Germans cemented the agreement with Japan and Italy in the 1940 Tripartiate Pact, and later brokered a non-aggression pact between the Soviets and the Japanese. They also agreed to recognize the Japanese puppet states of Manchukuo and the Reorganized National Goverment of China, thus forever breaking the Sino-German relationship.

Still, even with all the German attempts to mollify the Japanese (including for instance delivering intelligence from the German commerce raider Kormoran as to the weakened defenses of Southeast Asia) the Japanese never did really trust the Germans. German assets in China were often seized by the Japanese authorities, and German attempts to, for instance, exterminate the Jews, met with steadfast resistance by even the more radical members of the Japanese military. There was limited submarine cooperation in the oceans, but the Germans did not advise the Japanese as to Operation Barbarossa, and likewise the Japanese to the Germans re: Pearl Harbor. Indeed, after a disastrous attempt by the Japanese to invade the Soviet puppet of Mongolia, Japanese foreign policy shifted away from an invasion of the Soviet Far East (the "strike north") doctrine and towards the "strike south" ideal of the Dutch East Indies instead.

Sources:

Yue Lan, General von Seeckt and Sino-German Cooperation.

Jay Taylor, The Generalissimo: Chiang Kai-Shek and the Struggle for Modern China.

Ian Nish, Japanese Interwar Foreign Policy