Chinese citizens actually weren't especially singled out by the regime; as far as Kim il-Sung was concerned, anyone who wasn't Korean could fuck right off. This intensely xenophobic attitude bled from the government to the population with dispatch in the years following the Korean War. The East German embassy actually started collecting stories from its own nationals and the citizens of other allied states with embassies in North Korea of unpleasant and sometimes dangerous encounters with the locals, and periodically made complaints to the government. It didn't seem to make much of a difference; from what I can recall, there are documented incidents of North Korean citizens attacking Romanian, East German, Soviet, and Cuban nationals. The Cuban ambassador himself was attacked in 1965, and police had to rescue him from an angry mob. Stuff like this continued to happen, though perhaps at a less visible level, for years; Kang Chol-hwan in The Aquariums of Pyongyang admitted that, as a child in an upper-class 1970s Pyongyang neighborhood close to the Soviet embassy, he and his friends regularly harassed the diplomats' children. The Korean adults around them turned a blind eye to it.

But why? There were a lot of reasons, and you've pointed out one of the big ones. A great deal of North Korea's propaganda was based on the purity and uniqueness of the Korean race, how it was susceptible to corruption from foreign influence, and how that influence had to be guarded against. A strong leader (Kim il-Sung, naturally) would do what he could, but the Korean people had to be vigilant nonetheless. There was heavy pressure on North Koreans with foreign-born spouses to divorce; the government considered their unions to be little more than miscegenation. Plus, the more homogeneous the society, the easier it would be to see anything out of the ordinary within it. You can stick a foreign-born agent on the streets of NYC or Toronto and no one will be able to tell them apart at a glance, but hiding a foreign-born agent in a society that's 99.998% ethnically Korean is like parachuting a Hell's Angel into a Pure Romance convention. You're gonna have problems blending, is all I'm saying.

Interestingly, this revulsion toward the dilution of the Korean bloodline extended even to ideological allies. When nine young Japanese men hijacked Japan Airlines flight 351 and flew it to Pyongyang, they got a heroes' welcome from Kim and were then stuffed into a gilded cage. They got lonely (understandable), wanted to meet women (okay), requested the opportunity to do so, and then discovered that singles bars were not part of the Communist vision for the world. Not to worry -- they were effectively gifted wives by the regime. Not Korean wives, mind you. North Korea lured young Japanese women to the country with bogus study-abroad programs, refused to allow them to leave, and forcibly "introduced" them to the hijackers. The regime also had a nasty habit of kidnapping young Japanese nationals off remote beaches in Japan and either stealing their identities or using them to train agents in Japanese language and culture. (Sometimes both.) Some of these unhappy souls likely ended up as wives for the hijackers as well. These kidnappings became a major international incident when NK finally admitted to it decades later and Japan -- predictably enough -- went apeshit.

Having said that, China was a special case ... sort of ... until it wasn't. NK paid a lot of lip service to its relationship with China, without which NK would not even exist as a country. If the UN-backed South had won the war, Korea would likely have been forcibly unified under Southern control, which had 2/3 of the peninsula's population. Overall there was greater tolerance toward the presence of Chinese nationals in NK, and more particularly in the north; nearly all of North Korea's northern border is with China (barring an 11-mile stretch with Russia), and there's a sizable Korean-speaking minority on the Chinese side. During the ravages of the Great Leap Forward and the Chinese famine, Chinese refugees actually fled to North Korea in search of food and shelter. That may sound insane to us now, but NK's economy was actually doing better than (or was at least more stable in comparison to) its Chinese counterpart at the time. I wouldn't go so far as to say that these refugees were welcome in North Korea, but the notion of being a secure, stable, and successful country was certainly a useful propaganda victory for Kim.

However, the Cultural Revolution (1966-1971) marked a turning point in North Korean/Chinese relations, and not for the better. After a few "oopsie" incursions by the Chinese army over the border, Kim was paranoid that Mao was going to try installing a puppet leader in North Korea, and the regime tightened its grip on the population still further. As B.R. Myers notes, the songbun system (which classifies all of North Korean society by its perceived loyalty to the regime) actually dates to this era, and to Kim's desire to elevate the most loyal and reliable citizens and to marginalize the least loyal. Unsurprisingly, foreign-born citizens and/or any citizens with foreign ties had bad songbun, had little or no access to the country's most prestigious schools and jobs, and became the subject of even greater suspicion and hostility by North Korean society as a whole.