Wow dragonized that's a meaty post to say the least.

That part about individualism is interesting so I think I'll just respond to that one for now before I develop carpal tunnel syndrome.

i would disagree that a lack of individualism can be used to call the Chinese morally inferior as you are judging Chinese morals and values by western ideas of what is good or right.

Yes the Chinese as with much of the Far East have built their society around the group as opposed to the individual but in reality they are just seeking to attain the ultimate goals of social harmony and balance between individuals in the same way that we westerns are. You mention things like 'face' not being a problem but surely that's like saying that self respect is a bad thing in a western culture. They are just two sides of the same coin, one side values the group - not feeling embrassment or shame in front of your peers by doing something morally unacceptable (face); the other the individual - avoiding feelings of guilt or contempt in ones self by acting immorally (self respect). This is just one example of how both approaches use different mechanisms to answer similar questions of morality.

I'm not really sure karma is the best term to discuss aspects of Chinese culture as it is more associated with Indian branches of Buddhism and Jainism. The concept in my opinion that would best suit what you describe is the Confucian concept of 'shu' which in western terms is I guess the equivalent of doing to others as one would have done to themselves.

As Confucius said
己所不欲，勿施于人

Of course the literal translation of 'shu' in modern Chinese is forgiveness so Confucius is suggesting that when someone wrongs you you should forgive them (high morals indeed!). Later scholars criticized that soft liberal approach of his but still carried on the theme

To quote from Xun Zi

Being unable to serve your lord
Yet expecting obedience from a servant is failure to liken-to-oneself. '
Being unable to give parents their due Yet expecting sons to be filial
is failure to liken-to-oneself.
Being unable to be respectful to an elder brother Yet expecting a younger to take orders from you is failure to liken-to-oneself.

From what Xunzi writes we can see that this is another mechanism for upholding the moral codes of the culture. Do as you should do or there will be consequences. In western/individualist thinking we like the idea of being able to do whatever we like so long as what we do does not limit the right of other individuals to as they like. If we step over the boundary we expect there to be consequences. Same coin, different sides.

Of course neither system is perfect and neither the individualist approach or collective cultures have been able to prevent the kind of atrocities that you described at the end of that paragraph.