It seems like there was a decent amount of context missing here which leads to this ambiguity. Reading the original I can see it a couple of different ways but it seems to me that what is implied is that there was a genre of story in which the villain was always Chinese and that genre was full of shitty books that relied on racist cliches rather than clever plots or good writing. The advice then is to not follow down that path.

To me a modern equivalent would be if Spielberg decided to make a reality show to try to do a good version of it: at the end of the day the genre is just shitty and unsalvageable for more reasons than one.

Also it is hard to figure out if the original source was prejudiced against Chinese people or not from this alone. This is a discussion about good and bad writing, not about race directly.