In sum, this is not a good book, alas. The facts don't cohere, and the author selectively brings up suspect evidence to prove something which might not exist.
Stanford University Press published this text which claimed to be a groundbreaking first study on the "discourse of race" in modern China. Dutch-born Professor Dikötter published it to prove "racism...was not peculiar to a bigoted and ignorant minority in Europe". It is a valid argument of course, except that the "minority" might not be so few in certain nations. As it happens, this was Dikötter's doctoral thesis for the University of London, School of Oriental and African Studies.
The problem with this work is that Dikötter views it completely from a Western perspective and ends up reading numerous Chinese references out of context. There were far fewer non-Chinese contacts in ancient China, owing to their geography (Gobi Desert in the West, Himalayas and the South China Sea in the East). Another thing is the use of the word "barbarians", translated from various names like Dongyi. A case can be made for the pinyin man (tone 2) to be translated as "barbarians", but the 121 AD dictionary Shuowen Jiezi defines yi 'as "level; peaceful" or '"people of eastern regions". The Dongyi are associated with archery, and legends say their leader Houyi ''invented the bow (courtesy Wikipedia). The Chinese simply defined yi 'as "people of eastern regions".
There are other ways in which Dikötter seems to take things out of context. Shanhaijing, for everyone who has seen its illustrations, was essentially a book of myths. Dikötter insists using animal radicals meant tribes were seen as "bestial", but ancient animal totems were common, and radicals might just be representative.
Bigotry of course exists in ancient China, as well as xenophobia. But some of Dikötter wrong references are quite glaring. For example, he quotes Zuozhuan (4th century BC), which he translates as "if he is not our race, he is sure to have a different mind." But what did Zuozhuan went on to say? "The Kingdom of Chu may be huge, but it is not our tribe (or kingdom)." So where was the Kingdom of Chu? Right in the middle of Central China, where the Yangtze and the Hwang-Ho are. (See map from Wikipedia) So that "race" should rightly be translated as "tribe".
There are many ancient references that Dikötter skimps or skips over. The ancient misreadings are many. From the Han Dynasty Dikötter skips five hundred years to the Song Dynasty, missing out on the Tang Dynasty, the most cosmopolitan Chinese dynasty. (The famous general rebel An Lushan - of Iranian-Turk ancestry - was a non-Han Chinese; the Emperor Xuanzong made him his godson.) There are counter-arguments too which Dikötter fails to observe. A patriarch of the Chinese, Shennong (ie. Divine Farmer) was described in Wikipedia as "ox-headed, sharp-horned, bronze-foreheaded, and iron-skulled"; and illustrations often depict an ape-like man chewing on plants. But Shennong was one of their most revered "mythic" ancestors. Mozi, one of the respected Chinese philosophers, was dark-skinned. "Kunlunnu", a chuanqi tale from the Tang Dynasty, depicts a noble, highly skilled Negrito slave (he was a slave to repay former debts: the Negrito slave was too highly skilled to be "enslaved".) And then, there's no mention of Silk trade either with foreigners.
The modern references of Chinese "racism" does show bigotry and racism, but more xenophobia. In truth, the Chinese's documentation should be highly influenced by Western accounts in the early 20th century.
Does bigotry, racism and xenophobia exist in China? Of course. They are plenty in the book to note. But a book which purports to report only these doesn't show the other side.