First, let us verify that Muslims have been demonized in China.
https://en.wikipedia.org/wiki/Islamophobia_in_China
Please look up the Strike Hard Campaign
https://en.wikipedia.org/wiki/Strike_Hard_Campaign_Against_Violent_Terrorism
The amount of money and personnel poured into this project definitely indicates a panic much like the US engaged in. In some ways what China did is far more extreme than just infiltrateling some mosques like the Americans did. What the US did that China didn't do is the bombing of civilians in the Middle East. So while China went more extreme within its border the US is just straight up terrorizing foreigners in the name of stopping terror.
Saying that the US, UK, and Israel created the terrorists is pretty poor propaganda considering even the Chinese government admits that East Turkestan Islamic Movement was responsible. This organization has been mostly funded by other terrorist organizations.
There is a conspiracy here though with elements of the US covertly bankrolling Osama Bin Laden until they turned on each other. So there is some truth to the propaganda