I'm going to have to disagree with you there. The Mandarin is a caricature, but of old 60's Chinese stereotypes. The very idea that the could-have-been Mandarin would be in any way, shape or form commentary towards China now is quote silly. The Mandarin wasn't Chinese in any stretch of the imagination. He was just another Dark Knight Joker who I'm quite frankly sick of as a villain.
You see, the movie Mandarin, isn't some grand interesting villain. He's just another evil for EVIL ANARCHIST sakes villain. And I'm glad the movie shows us just how rediculous such a character is. Who could possibly follow such a madman? No one! It's all just a front man.
Then you apparently do not know "The Mandarin". Basically what The Mandarin is, is the Chinese version of Hitler, out to see Asia dominate the world. He's kind of like Captain America to racist chinese ideals and militarism, which is why he's "The Mandarin". In a lot of respects doing what Fu Manchu was up to, though being a super villain he wasn't quite as subtle as Fu Manchu was at times.
Back during the whole "Majripoor" arc in the 1990s you had this bit with Wolverine and Jubilee running into him. The last "free" members of the X-men if I remember, the rest having been overcome by the mechnitions of Cameron Hodge (then a head reanimated by mephisto's magic and placed on a giant cyborg body if I remember). They wind up escaping him largely because he winds up trying to recruit Jubilee because she's ethnically Chinese. Around this same basic time period he was running an alliance with "The Hand" and they kidnapped Psylocke and brain washed her, physically turning her into an Asian because The Mandarin couldn't stand having a caucasian minion even via The Hand alliance (The Hand was a bit less racist, but a natural ally).
While at one time there was a bit of racism inherant in this, largely having to do with the communist takeover of China, it wasn't paticularly relevent because as a whole China wasn't really doing much to anyone, and was actually an ally of a sort against Russia despite similar philsophies. However recently that has changed, the chinese who are incredibly xenophobic, especially nowadays, are building up a huge, offensive military force, and developing technologies they hope will force a conventional war, while engaging in cyber-espionage (along with the old fashioned kind) against nations like the US. They are also rattling their sabers about colonizing other nations by force, and gaining revent against the western world for the "trivialization of their culture" and not bowing down to whom should be the true masters of the world. This propaganda is in part how China's elite, the well educated people who live in some of the largest and most modern cities in the world, keep their slaves who work in the sweatshops, and live alongside their own livestock (which is how SARS got started) in line. It's a lot like what you saw with the USSR. It might be something that could be ignored, if China wasn't actually trying to develop this technology, and actually building a navy capable of projecting it's huge military into other countries. When a nation like China wants an offensive weapon like an Aircraft Carrier, you have to wonder who they are planning on attacking with it, that's not a defensive weapon.
Right now we seem to mostly be burying our heads in the sand when it comes to China, and trying to pretend they aren't a problem. We're worrying about being offensive and antagonistic, when really we should be both of those things to an increased degree in response to their own behavior. Seeing vilains representing the belligerance of China, rather than trying to dance around the subject for the purposes of political correctness is not a good idea.
See, 20-30 years ago, when some of those vintage Iron Man comics were written, I might actually kind of agree with you or Bob about what The Mandarin represents. Today on the other hand I feel he's a bit more relevent than he was then.
For the record though, the idea of the "face" of the Mandarin in the movie being laugable in it's agenda is kind of a nice piece of liberal propaganda in of itself. You say that you couldn't see his actual "motive" making sense when there is nothing else behind it, yet to be honest that's exactly the kind of behavior real terrorists engage in, and is part of any real war as part of psychological warfare. They made the guy seem more sypathetic to The Middle East than anything that should be called "The Mandarin" (got knows why they even used the name with this version), but at the end of the day his reasons for apparently blowing stuff up, were pretty much the same reasons as Al Queda... to hurt the US, force compromises, and scare the people, while making the US seem weak and ineffective.
Of course I'll be honest in saying that this is probably being over-analyzed in what wasn't that good a movie. For example even as far as the twist goes it has a major WTF moment in terms of Ben Kingsly claiming it was all fake and he was totally innocent, when the dude blew an oil executive's head off on national TV. Given that it worked I'd imagine they couldn't have faked it since the guy could have been IDed otherwise, and the whole thing would have been blown when Shield's recognition software said "it's Joe-Bob the actor, not a real Roxxon oil executive" or whatever. Of course like a lot of things in this movie we're not supposed to really think about it that hard, we're suppose to accept that he faked this and everyone fell for it, because well... the script demands it.