We are playin 2nd edition; that means he can’t build a MAJOR in this
Countries?
You can only build/upgrade to major factories in territories that you originally control.
In other words, it must be a territory that has your nation’s symbol on it.
The occupied Chinese territories are considered Chinese original territories since they have China’s symbol, so Japan cannot make Major factories in these territories.
How would you play that up in Russia then?
Leaving your far east Russian stack vulnerable to a Japanese attack is a waste. You might as well just move them towards Moscow. If you want to keep your Infantry in the far east, then you need to evaluate what Japan can hit you with.
I would suggest to move them all to Buryatia on round 1. After that, if Japan isn’t in a good position to wipe out all 18 infantry and 2 AAA, move them to Amur to threaten Manchuria and Korea.