Brandonzin, a blogger from Hong Kong has a post about ethnic minorities in China and he also discusses Muslims in China, here is a relevant excerpt.
Muslims can be seen almost everywhere in Dongguan and Shenzhen, the southern part of Guangdong province, which are the cities I mostly frequented. Most of them operate restaurants, noodle shops or stalls. They appear to get along with the rest of the Han people very well. They do not seem to feel alienated as most of the residents there are from other provinces or other cities of Guangdong. The Chinese Muslims in the area speak Mandarin or Putonghua and my personal experience was that they are just as economically minded as we Han people.
If one thought that the Muslims in China are being purged by the China authorities or the Han people, I think he is wrong. As can be seen from the link in question, Muslims’ mosques can be found in major cities in China and their religious rights or freedoms are, to a great extent, respected . I found out that there is one mosque in the middle of Shenzhen, a special econominc zone, close to the border of Hong Kong. Honestly, although the mosque is quite modest is size, I have not seen a christian church or a buddha temple that big in the southern part of Guangdong, if at all.
Islam in China 
All this while, I have read up on Muslims in China and from my friends, I tend to get various views on the assimilation. Through Brandonzin’s views, I am able to get a clearer idea. Albeit the blogger may not be a Muslim, I am delighted to get the opinions from someone that has a high respect on Islam. Truly appreciate your frank perspective.
As far as I know, most of chinese have no religion at all; according to my friends from china and NGM.com-may 2008 . So, it is very beautiful to be a muslim in such this environment and keep practising Islam. Being a good muslim is the best way of introducing Islam to other chinese people. I hope God helps us to be real muslims, whereever we are; Insha-allah.
* Dr SETI from Iran