The focus of this article is the ethnic conflict and terrorism related to the Muslim minorities in the People's Republic of China (PRC). China is a home to 56 official ethnic minorities, about 10 of whom are Muslim. The most numerous of the Muslim minority are Uighurs and Hui. In spite of the different ethnic origin, language and history they consider themselves as Muslims in a society ruled by the Han majority. After the start of China's Economic Reform and Open Door policy in 1978, the country's Muslims were able to build a dialogue with coreligionists in other countries and become part of the worldwide Muslim community through the implementation of religious prescriptions such as annual pilgrimage. In the specific context of the Chinese society, this process has led not only to a revival of moral and spiritual traditions of these groups, but also to the realization of national identity. The authors conclude that the identity of China's Muslims is closely related to the specific forms of Islam in China which was dominated by the Han non-Muslim majority. In this way the Islamic radicalism can be seen as the movement against the state which is perceived as the threat to their national and religious identity. It explains the popularity of global Islamist movements such as Al-Qaeda which calls for global jihad as the protection of Islamic identity and transfers the combat experience to the local radical organizations. The research is based on wide range of sources in Chinese, English and Russian.