Labels with intent to insult

My son had an incident in school yesterday. One of his classmates called him a BANGLAH. Actually, the word itself means, coming from Bangladesh - except that, in the context that it was used, the term was meant to denote skin colour - this remark came from a local chinese boy. From my understanding, it has been happening all year.
Question: So what if my son's father is from Bangladesh.
Schools promote racial harmony day annually - and from the last racial harmony day press report, children seem to be getting it i.e. we are all people and respect for all is required for a peaceful world. Yet, this boy in my son's class, apparently missed 6 years of racial harmony in primary school, and the most recent one this year!
To make things worse, the teacher present DID NOTHING. She has let this go by for 7 months during her language class. I think it's not just the children that need to be educated, it's the teachers and parents as well. Children go by example and if not checked at the first point of occurance, then we have silently consented and are in agreement.
I'm waiting for the school to respond and I will take up this matter, because it's not injustice done to my son alone, but the entire campaign of equality for all.