"Has China lost its morality and sense of compassion in its rush to modernity?"

No, the Chinese haven't had any morality since the 1960's when their spirits were stripped by Chairman Mao. What this shows, along with dozens of other incidents is that "prosperity" and "education" has done nothing for the Chinese.

http://www.nytimes.com/2011/10/22/world/asia/chinese-toddler-who-was-run-over-twice-dies.html?_r=1&hp