I strongly disagree with your husband and with #1. Anything sent through any US Mail product hooks into China Post. Do not risk this handoff going awry. Pay the money and use FedEx in one of their document envelopes, as they retain custody the entire way through, and deal with US and Chinese Customs themselves.

I also disagree on the address. Without a permanent residence or a business address (and sending to a business address is the preferable one), the best thing to do is have it sent to a FedEx permanent station (not an outsourced counter) where he must then go to pick it up and sign for it (with his passport as ID). It is very risky to have any sort of mail or package chasing around somebody with a temporary or hotel address. Too many workers and not enough accountability at most hotels, very easy for something to get misplaced or pilfered. At least at a FedEx station, it will be held safe--your son just needs to tell you which location in Shanghai works best for him, with the understanding that there may be no truly convenient choice. The price of aggravation he must pay for the carelessness in losing the wallet in the first place.

The Consulate will be of no help on this sort of thing, only if he lost his passport would he be dealing with them.