Discrimination Against Chinese in China

Heard a disturbing story in Shanghai, about a local popular foreigner hang-out. There were rumors that this place didn't want many Chinese customers, so a Chinese guy I know had a buddy call and ask in Chinese if they had any booths left to reserve and was told no. Then my friend called and asked in English and they said, sure, we have several. This is disturbing on many levels, from being wrong in the first place, to really pissing off our gracious hosts who are understandably sensitive to this sort of thing.