I can't speak for the rest of the world, but
Chinese people use the term
Westerner to mean anybody of
European descent -- including Australians -- and also just about all
North Americans, of whatever heritage. Naturally, Chinese only do so when speaking
English; when speaking Chinese, they tend to lump all non-Chinese under the terms:
laowai (="old outside", technically respectful);
waiguoren (="outside land person"); and
gweilo (="ghost fellow" or "devil man", not respectful).
Please see also schist's excellent writeup on Chinese "ghost".
There is great difficulty when speaking about people, places, and things which are not Chinese. It is not enough simply to use the negative; there is a definite sense among both Chinese and Westerners that there is an identifiable "Western" appearance, language, people, and culture. Of course, this is nonsense, but there still exist several words for it, which -- in the English-speaking Chinese world, have interchangeable meanings:
Westerner
American
North American
White
European
Native American (this has nothing to do with "Indians"
English
and various hyphenated compounds of any of the above
Often the choice of term seems dictated by political or subtle considerations. But all these terms seem to point to the same thing, whatever it is and however unreal it may be.
I am fully aware that this WU will be found offensive to many readers. I can only say that it is true. Personally, I found it offensive to be quietly squatting on the sidewalk eating a bowl of noodles and have a motorcycle boy ride by shouting laowai! laowai! laowai!
See xenophobia.