reply to Sensitive
Re: Security breach? were the sites with the Chinese ads sites that are in China or contain content related to China? If so, it might be that those sites have chosen to have those ads displayed on their sites. It might interesting for you to visit a few of the sites in question both from your VPN and just from your un-VPN'd ISP connection to see if you get different ads for each.
The site is hosted in the US, has content related to China, but does not choose the ads. The choice is made by Google based on the location of the visitor.