This article from the London Times Online reports an internal Islamic militant group has declared jihad against China and the Summer Olympics. This could prove to be an unwise move on their part.
Unlike the U.S., China isn't particularly constrained by civilized norms of treating your enemies nicely. An unelected government, China might respond by making Islam illegal for all citizens of China and imposing the death penalty for violators.
I don't think anybody knows for sure how many inconvenient folks Chairman Mao had killed in the process of perfecting his "peoples' paradise" - that number is surely in the hundreds of thousands at a minimum. Based on their careful study of China's long history, internal unrest is the one thing the Chinese leadership fears, and won't tolerate. Don't be surprised if China declares, or practices without declaring, the functional equivalent of jihad against Islam.