On the contrary, I think it's quite clear that Knox meant one should avoid the cliche. The version you linked is the original when it was only nine rules, the later decalogue version is even clearer, I think:
>No Chinaman must figure in the story. Why this should be so I do not know, unless we can find a reason for it in our western habit of assuming that the Celestial is over-equipped in the matter of brains, and under-equipped in the matter of morals. I only offer it as a fact of observation that, if you are turning over the pages of a book and come across some mention of 'the slit-like eyes of Chin Loo', you had best put it down at once; it is bad. The only exception which occurs to my mind--there are probably others--is Lord Ernest Hamilton's Four Tragedies of Memworth.
It's the western habit of assuming asians are intelligent but immoral that ultimately spoils the story, not the presence of asian immgirants themselves.