I find it interesting that this attitude is accepted in SZ. I have been there and found the people there more open minded than those of the city in which I lived (Xi'an). I lived and worked in China for about 5 years; so the below is from my experiences there as a foreigner.
That said, from what you have added to your comments about his advances to women, especially those who are not white. I would do the following, bearing in mind that racism is tolerated in most of China (as the Chinese culture and language itself is quite overt and racist, e.g. laowei, weiguoren (for anyone not Chinese in any country), etc.). My apologies if the pinyin is wrong I write Hanzi far better than I do pinyin now.
Not matter what you choose to do, feel free to tell him that this his openly-racist attitude makes you uncomfortable and you would like him to not do that around you.
First, I would consider who he is in the company. If he is simply a local manager that you can potentially avoid interaction with in the future. I would deal with this once, returning to the States and bring it up to HR there or casually when debriefing with a colleague (preferably someone who is on the same or higher rung on the corporate ladder as he).
If that is not possible, I would find a more "Western" HR professional in house and bring your concerns to them. It is possible that his local team doesn't understand what being a part of the KKK means and implies. Also, assuming you have a great relationship with the women his has been accosting encourage them to step up to HR as well. China does have rules (albeit more of a grey area, but rules nonetheless) about sexual harassment at work. A lot of foreigners don't realize that, and assume that they can talk to their female colleagues the same way they would their "friends" at the dimly lit KTV in the alley.
No matter what you do - tread carefully depending on what kind of company this is and what your future career goals are this can effect your future visa applications as after you go to close out your visa your employer will send a "note" as well to the PSB and it can taint your application process (either through delays or out-right denial). They have to close out their side of your visa, but there is a section for comments about you where they can write their "two-cents" which is normally left blank, but some situations (mine was one) is where they have to write in there. This is often done as a result of sensitive clients or security clearances.