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I've been working in information security for many years now and this is standard practice all over the world. I'm sure the State Department is happy to have Asian Americans working for them. This is not that kind of discrimination.
It's a practical thing: It's basically impossible to tell if a person has a secret loyalty to another country. So how do you prevent spies from infiltrating your organization(s) from any given county? You take basic precautions like preventing people who have very direct ties to a country from working for you in that country. It's basically best practices because there's not much else you can do.
If I were a 2nd generation American Chinese citizen (e.g. my parents immigrated there) living in China and I applied to work for the Chinese embassy in the US do you really think the Chinese government would allow that? Hell no!
Would they let me work in Africa or other areas of Asia? Maybe! But the US would be a no-go zone for sure. There'd be no way the Chinese government would trust me not to have a secret loyalty to the US.
Not only that but if someone still has family living in a foreign country that's a big red flag as well. It can get you reassigned regardless of your ethnicity.
Let's say you've been working in the US embassy in China and your sister married a Chinese man who has family in China: You would would have to report that change in family status to the State Department (it's part of the rules). Then they'd make a determination as to whether or not you could keep working where you are.