I think that the licence of the times can be invoked in this case. Mao was nothing if not an exceptional self-publicist, and many westerners in the sixties and seventies saw him as a man of the people, maybe even an inspiration for the civil rights movement in the US. The extent of the depredations that he had heaped upon his own people was largely unknown even within China, never mind outside it. Jung Chang and Jon Halliday's landmark 2005 book Mao: The Unknown Story
has arguably blown the lid off of Mao's most heinous crimes, but it's a lid that would have been pretty tightly shut when The Mind Of Evil
was written for TV.
(Also, the episode can be interpreted as referencing a strictly Whoniverse version of Mao, as is the case with its Churchill and its Hitler. The UNIT stories were supposedly set some seven or so years in the future, placing the story after Mao's real-life death in 1976, but in TMOE
he's referenced as China's current leader.)