Ted (US)
5 years ago, I was offended when someone pointing at me yelled out loud: 'Look! Laowai!'. It really depends on how this term is spoken: it can be just a statement, or an insult. These days I just don't care, after all, I am a foreigner. When it really gets to me occasionally, I yell back 'lao zhong' (Old Chinese) and glare at them. That usually stops any further comments.
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The original piece: http://bbs.chinadaily.com.cn/thread-879259-1-1.html
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