This attitude is there not just regarding obvious (Euro or African) “lao wai” (foreigners), but even other neighboring Asian countries or (for some of the major dialects) other parts of China. Here is my all time favorite story in this vein - it happened to a friend of my father.
Background: my parents and their friends are all from a generation born in China in the mid to late 1930s, and grew up in wartime strife - war with Japan, and then the Nationalist/Communist civil war. Most of them spent the first 10-15 years of their life fleeing from one part of China to another, finally ending up in Taiwan and then emigrating to the US in the late 1960s as grad students who then stayed and became citizens. As a result, most of them can speak or understand four major and mutually unintelligible dialects of Chinese - Mandarin, Cantonese, the Shanghai dialect, and Taiwanese.
After retiring in the early 1990s, this friend took on a part-time job as a contingency driver for a car service. He didn’t do it every day, but he’d be on call for airport pickups and the like in case they got really busy and needed to handle “overflow” (he owned his own car suitable for the task, like a Lincoln Continental or something).
One day he picked up a businessman arriving from Shanghai, maybe in his early 30s, with a pretty young woman on his arm at the airport. As he loaded the luggage into the trunk, the man gave him that scrutinizing “what kind of Asian are you” look, before asking him in English: “Are you Korean?”
Among Asians from Asia it is not considered particularly offensive to ask a stranger something like this any more than it would be to ask about their religion, weight or if they have diabetes (really, a lot people don’t think twice about it), but having been in the US for so long it bugged him. So he said, “Yes, I’m Korean”. And as they got into the car and drove off, he listened to them conversing in Mandarin.
Woman: What did you say to him? [Evidently she didn’t speak English.]
Man: I asked if he was Korean.
Woman: Is he Korean? Maybe, I couldn’t really tell.
Man: Oh, I could tell right away. Just look at him! That big nose, beady little eyes, a face that’s neither round nor square… (they both laugh)
A little while later the woman fished for something in her purse and dropped it on the floor. Our friend asked in Mandarin, “Do you want me to turn on the cabin light?” Dead silence. Then, in English, the businessman said accusingly: “Aren’t you Korean?” Followed by Mandarin, “How is it that you speak Chinese?” The friend gave him some story about being bilingual in Korean and Chinese from growing up near the border with family on both sides. (Which is certainly possible - I’ve met a few people like this.)
You might think the people in the back seat were put in their place from this, or learned some kind of lesson, but no. The man instead switched to using the Shanghai dialect to start talking about how rude the driver was for pulling a stunt like that on them. Our friend inserted himself into that conversation too, pointing out that he hadn’t said anything rude, even when they were talking about his face, just trying to help them out.
The rest of the ride went in total silence. I don’t know if they tipped him or not but gaining the story is what he valued out of the experience.