Being fluent in English,and having to speak English,are two different things. The two faculty members , suggesting that students were 'impolite' for speaking Chinese among themselves, and threatening to take that into their academic consideration, are not behaving appropriately.
They need to speak English as they are in an English/Spanish speaking country. The Chinese have not heard when in Rome do what they do! They are at a foreign university, so get with the program! North America’s main languages are English, Spanish & French
They should have to be more proficient in English. Most students from China send one bilingual kid to class to take all the notes, and then translate for them so that they understand the content. Then the problem is you have a bunch of University grads with very basic English.