I had the same experience in China in terms of a few people who were rational and intelligent. Two of my students were a "campus couple" and helped me out a great deal with getting stuff done which I couldn't do by myself. James said he wanted to go into government. I tried talking to both him and his girlfriend to change his mind telling him it wasn't worth it and if they wanted a better life to get out of China.
I think you are right about the Chinese government being behind fanning the flames of the protests. When the death of a foreigner happens (it's not if, because I believe it will happen if the attacks continue) the Chinese Government is going to have a big problem on their hands.
Embassies are suppose to be sovereign territory. If I were Japan, the next time this happens I would recall my ambassadors and staff and close the embassy and instruct China to bring their people home from Japan. Something like this would be a huge wake up call for China to let them know they can't get away with this stuff and that claiming ignorance doesn't work.
China is attempting to be the Asian bully. It's not just Japan they have issues with. Korea, Vietnam, and the Philippines all have unresolved issues with China.
I know a few years ago, Japan was pushing to be able to have offensive weapons. I have mixed feelings about it due to their history and the strong possibility that it could lead to an arms race in Asia. At some point if China continues to become aggressive it may become necessary to allow Japan to have more weapons.
All of this combined with the stuff going on in the Middle East is pretty damn frightening. Who knows if the Chinese will start attacking the Korean Embassy. I would be you dollars to donuts the Koreans are preparing for the possibility it could happen.