There are plenty of Muslims in China. They, like the Russians, are having home-grown problems in that area, and they still haven't decided which side they need to be on.
Yes, the Chinese government is more worried about people who meditate in public than those who murder in the name of their religion. Islam, being a psudoculture as opposed to a real one, is only compatible with communist/social/anarchist/collectivism. Naturally, the communust government of China has no problem with this.
It's astounding they'd allow their country to be conquered just because the Islamists are useful to them in their war againt the west though. Talk about sutting your own nose off to spite your face.