You're asking about the sack of one of the most important cities in China, which took place in the middle of a rebellion that played a major part in shaping the history of the Middle Kingdom for several hundred years to come. So it's unfortunate that the sources that survive for the events of 879 (not 878, as Wiki has it) are not only pretty meagre, but frequently contradictory.

For all these reasons, constructing a full answer worthy of this question is going to take some time – so I'll start with the short version.

• Guangzhou (which some readers will be more familiar with under another name, Canton, or possibly in the Wade-Giles version of its name, Kuang-chou) was an important trading city in this period, and it sat at one end of what was, for a time, a major maritime trading route running all the way to the Persian Gulf.
• The port was large and wealthy for more than 100 years – until the massacre you mention, directly followed by the fall of the Tang dynasty and then the onset of a long period of civil war in China, severely curtailed the transoceanic trade and reduced Guangzhou to the status of a comparative backwater for several more centuries.
• While it lasted, however, the trade between the Abbasid caliphate and Tang China was based largely on ceramics. We know this because large quantities of bowls, dishes and jars and have survived to be found on several important shipwrecks of the period, as well as in archaeological digs in what is now Iran. The trade did also feature other luxury goods such as silks, mirrors and Tibetan musk, but these aren't always as durable, so we have less archaeological evidence to help us determine their relative importance.
• Unlike the Europeans, whose later trading efforts were often stymied by lack of Chinese demand for western products, the Arab merchants of the Abbasid caliphate had plenty of luxury products of their own to trade. By exploiting the diverse riches of the many lands bordering the Indian Ocean, and ranging as far south as the gold port of Sofala, in what is now Mozambique, it seems that they were able to trade on more or less equal terms with the Tang.
• As for the question of how Guangzhou survived and prospered despite experiencing several different sacks, I'd say that part of the answer was that these events took place across quite a few trading generations (there was more than a century between the two major disasters that you reference); part was that the normal run of maritime dangers in this period, which certainly include piracy, typhoons and shipwreck, would have loomed a lot larger in the minds of the merchants of the time than the occasional one-off massacre; and part was to do with the nature of the first of the two sacks of the city, which was probably the work of the merchants of Guangzhou themselves...

We're not quite certain about this last point; accounts differ. All of which brings us on to...

Sources

The two Chinese dynastic histories that cover the late Tang state were both compiled more than 200 years after the events they describe, and they contain little more than a passing mention of what happened at Guangzhou – which was then probably the largest port in southern China. Our main Arab source, in the meantime – which is where the estimates of six-figure deaths is drawn from – was compiled by a man who never left the Abbasid caliphate, so it's probably best to begin this response with an acknowledgement that the figure of 120,000 deaths cannot be proven, and is almost certainly best understood (like most medieval figures of this sort) to mean simply that "a lot of people died." Since the Chinese sources that we have offer no detailed discussion at all of what happened at Guangzhou, it wouldn't even be safe to presume that the rebels specifically targeted foreign merchants. I'll come back to this point later.

As for that Arabic source I mentioned, it is Accounts of China and India, a book of akhbar – a compilation of oral accounts, supposedly taken down verbatim but more likely polished by the compiler – set down in two distinct parts, about a century apart. The earlier portion that we are most interested in is traditionally attributed to Sulaymān al-Tājir (that is, "Sulaiman the Merchant"), though he was at most only one of a number of travellers who apparently contributed accounts to an anonymous compiler. Although there are quibbles about some of the material contained in this portion of the Accounts, internal evidence suggests that much of the book does rest solidly on material contributed by merchants who had travelled to China and who had ranged almost as far north as the Korean peninsula.

From the particular perspective of this question, however, we have to note one significant problem with the Arab sources: the material contributed by Abbasid travellers who we can be fairly confident had actually visited China dates to c.851, before the sack of Guangzhou. The information we have about the sack of the city itself comes from the second part of the Accounts, which was compiled in about 916 by an Arab geographer named Abu Zayd al-Hasan al-Sirafi. Abu Zayd, as his name indicates, came from the Gulf port of Siraf, at the western end of the sea route to China, but he never travelled to the east, and his portion of the book is less clearly sourced than the part usually attributed to Sulaymān al-Tājir. For this reason, and while there's certainly no reason to write it off completely, the second part of the Accounts is usually considered less reliable than the first half of the book. I'd suggest we need to be very cautious of the figures that it offers, including that for the number of dead at Guangzhou.

With all this said, however, there's no obvious reason to doubt that the foreign trade that passed through Guangzhou was pretty significant, nor that the sack of the city did not result in the deaths of a very high proportion of the foreign merchants who had based themselves there, and every reason to think that the commerce they were engaged in was important for both the caliphate and for China. Thanks in part to some recent archaeological advances, especially the discovery of several important shipwrecks, we know quite a bit more about this trade than we did even a couple of decades ago, so it is now possible to look in some detail not only at the ways in which merchants lived and worked in Guangzhou, and at what the city meant to the Tang state, but also at the fundamentals of the transoceanic trade itself.