It’s very outdated, like the term negro. Those words used to be in fashion, but are no longer the preferred terms, so they are offensive. Back in the olden days people used those terms to make sure that everyone knew that white people were the superiors of everyone else.
Your dad may not mean the term to be offensive, but it is. There really aren’t any offensive terms for old white men, so it may be hard for you to use an example that he can relate to. Maybe you can tell him that although he doesn’t mean the term in an offensive way, people consider the term to be offensive in the same way that one might use the word faggot to describe a gay person. The term is definitely a pejorative term. Try to make him understand that he is insulting the person when he uses that term.
In the U.S. the acceptable term would be Asian, or a simply Chinese, depending upon how the term is being used.