For long there has been an article (original article in Chinese) circulated on the Internet which propagates the idea that the English word China is a pejorative term and should instead be replaced with the demonym Zhongguo. The author believes that China is given its name because of its porcelain, or china. He proceeds to argue that we may as well call Italy Pizza or Germany Beer should we be called China. Neither is the adjectival term Chinese innocent. The suffix –ese is said to be derogatory and only used on the supposedly inferior races (in the eyes of westerners) such as Chinese, Japanese and Vietnamese.
Despite being Chinese myself, I have to say such sentiment is at best xenophobic and at worst nationalist. If we trace the history of these words, we will find that such claims are actually ungrounded and counter-factual.
The name China came into use to the Europeans when the Venetian merchant Marco Polo traveled eastwards in the 13th century and brought it back from the Persian word Chin. This word in turn can ultimately be traced back to the name of the Qin dynasty in 3 B.C.E., when the Han Chinese people were first united. The adjective Chinese is formed with the suffix -ese only because it is the standard suffix for forming an ethnonym in Latin/Italian. The word was only later borrowed into English. Considering the modern Italian words for English inglese, French francese and Norwegian norvegese, calling the Chinese Chinese does not seem to be any racist. (See So many nationality suffixes)
The word china, the alternative name for porcelain, only came into existence in the 16th century, as a shortened form of the term chinaware. Therefore, instead of giving China its name, china actually comes from the name of the country.
The same Persian word chin also gave rise to the Latin word Sinæ, which developed into the English prefix Sino-, as in Sino-Japanese War or Sino-British Joint Declaration, and the word Sinology, the study of Chinese things.
Although Marco Polo brought the name China back to Europe, he actually believed the faraway kingdom where he spent most of his stay was not China, but one called Cathay. This is because the Persian word chin, together with Sanskrit cin and similar words used in neighboring nations, were used only in south and southeast Asia. When Marco Polo traveled across Central Asia to enter northwestern China and to reach Beijing, people from this region to the northwest of China called the country variously as Kitad, Kitay, Cathay and several other similar names. As a result, he believed that the name Cathay referred to the region which is now northern China, whereas China referred to what is now southern China.
The word Cathay originates from the name of a Mongolian people in the north of China, Khitan (契丹). The Khitan people ruled over China in the years 907-1125. As a result, many northwestern races identified the Chinese people as Khitan. The name spread westwards, becoming Xitay in Uyghur, Kitay in Russian in Bulgarian, Kitai in Latin, Catai in Italian and finally Cathay in English.
For the next few centuries Europeans believed that there were two nations in present-day China, one called Cathay and the other China. It was only until the late 16th century that Europeans finally realized Cathay and China were indeed one and the same country.
As we can see, there is really nothing racist or pejorative here, at least none that is meant to be so. If there are indeed any derogatory connotations that come with the name China, then the problem lies in the people who irrationally connect the name with such ideas, but not in the name itself.