Kcdzim’s answers are all correct. This is stated in the Rulebook, although not as clearly as I would like:
Kwangtung and Burma are special cases. While they are not Chinese territories and cannot be controlled by China, Chinese forces can attack Axis units there and occupy them, but the IPCs generated go to the United Kingdom (unless India is under Axis control). These are the only non-Chinese territories that Chinese units can occupy.
This rule does clearly state that Chinese units can occupy these territories (see the red text). In game terms, to “occupy” a space simply means to be in it (the simplest definition of the word). The confusion comes in when people try to read more into the word “occupy” than is there. This may in part be due to the fact that the wording is a little unfortunate, as it seems to connect occupation with attack in the first reference.
The part that is unclear is exactly when China may control these territories and collect IPCs from them. However, the normal rules for captured friendly capitals apply here (see the blue text). This also is not as clear as it could be, and will be fixed in the next printing. Since there is a new printing coming, the current FAQ will most likely not be changed.
