NOT
"Mandarin"s would be of Chinese origin, at least you'd think so by the name. Is Hollywood fresh out of Chinese guys? I can think of a bunch right off the bat.
Would China be offended by a Chinese villain? If I were them I'd be all "AWESOME, look how badass we Chinese are, represent in IM3!"
Perhaps not, I dunno. I didn't see Scandinavians upset over Nordic gods being in Thor, and some of them being villains. Why would they be, it was awesome.
I am not really a fan of casting against type. This is not far off from casting Blade as an Arab guy - hey, they're from the African continent, so what's the dif, right?
There's a big difference if you ask me. Black guys should be represented on screen by... actual black guys, Chinese guys should be represented by Chinese actors - or at the very least, Far Eastern guys. I admit to old-school-itude on this issue.
Not UPSET by this casting choice, not boycotting the film or anything like that - it'd just be nice to stay true to type.