Earlier quoted context omitted.
I have friends born & raised in China who say the exact opposite of what you are are saying.
I was reading a popular Chinese forum (tianya.cn) thread on contaminated food, and I was surprised at how anti-government the tone was. (think reddit, but more extreme) There were jokes taking direct jabs at the party and state, and I was amazed that they didn't get taken down. I think Chinese tend to avoid talking shit about their country in front of foreigners to "save face". It seems to be part of the culture.
Now when it comes to talking shit in front of foreigners to save face and part of Chinese culture, I hope you don't mean that Chinese culture is inferior. When my Americans friends talk shit about their government in front of me, they understand that I speak fluent English and I know exactly what they mean. I don't talk shit about Chinese government in front of westerners I am not close with, because I know they don't speak Chinese, know nothing about Chinese culture (or feeling Chinese culture is inferior) and will take my comments out of context. Let me give you an example: giving cash as gift to people you know, friends, colleagues, bosses, is a new year tradition in China, and the money amount can be very large. We have similar gift-exchange for many occasions. This is a tradition that everyone in China follow, and it does make it difficult to fight corruption. In western countries when nobody should accept gift of more than $25 from people with working relationships, there is no way people can understand this, and most likely, they will (or self-righteously) say this tradition is backward. Power to you if you can change a culture, but it is ridiculous to see westerns response when hearing you might receive a cash gift worth a week of your income and there is nothing wrong with it. Culture difference between China and the West, is much bigger than the difference between western countries.