Aug. 4 (Bloomberg) -- An attack on a border patrol station in western China's Xinjiang region killed 16 policemen, state media reported today, heightening concerns about terrorism four days before the Olympic Games start in Beijing.

Sixteen officers were also injured when two men drove a dump truck into a team of police jogging outside their barracks at Kashi this morning, Xinhua said in its English-language service, citing unidentified local police. Attackers threw two grenades into the compound and also hacked at officers with knives before being arrested, the report said.

The attack underscores the potential threat to security in China as the nation prepares to host its biggest international event. With an estimated 4 billion television viewers tuning in to the Olympics opening ceremony on Aug. 8 and more than 40 heads of state and government leaders in the audience, China is working to ensure the games go off without a hitch.

``Since the early 1990s, terrorist attacks have been the number one risk for Olympic preparations, and we are paying great attention to this issue,'' Zhou Wangcheng, director of risk management for the Beijing Olympic Games Organizing Committee told a news conference in the capital today. ``The danger of a terrorist attack directed at the Olympic Games has always been there. We have made a comprehensive contingency plan for that.''

Today's attack happened in Kashi, also known as Kashgar, a city in the restive Xinjiang Uighur Autonomous Region near China's border with Tajikistan.

China's Biggest Threat

Xinhua's English-language report said police suspected the assault was a ``terrorist attack,'' although the agency's Chinese-language report, which was released two hours later, described the incident as a ``violent crime.''

``The police is doing all they can to investigate and we'll get to the bottom of this,'' the Xinjiang government's deputy information director Kairat Salief said in the provincial capital by phone. He declined to say if today's attack was a criminal case or an act of terrorism.

China's CSI 300 stock index fell 2.4 percent to the lowest in 12 days after Xinhua reported the Kashi attack in Chinese. Shares of Xinjiang-based companies including Ba Yi Iron & Steel Co. declined.

The People's Liberation Army, on its highest state of military alert in three decades, counts the East Turkistan Islamic Movement in Xinjiang as the nation's biggest potential terror threat.

On Military Alert

The People's Liberation Army deployed 34,000 soldiers in Beijing, Qingdao and other Chinese cities to shield the Games from the East Turkistan Islamic Movement and other suspected terror groups, the games' military director Senior Colonel Tian Yixiang, said at an Aug. 1 press conference in Beijing.

Tian counts the East Turkistan group his largest security concern. The military deployed 74 fighter jets, 48 helicopters and 33 vessels to protect the Aug. 8-24 Olympics. Anti-aircraft rocket launchers were installed at the Chinese capital's main Olympic stadium, known in the media as the Bird's Nest.

The Bush administration declared the East Turkistan Islamic Movement a terrorist group in 2002, supporting the Chinese army's crackdown of a militant group that allegedly uses force in an attempt to split Xinjiang province from Beijing's rule.

The group's political wing, the Turkistan Islamic Party, claimed it was behind several attacks in China between May and July, including a May 5 bus bombing in Shanghai, Agence France Presse reported on July 26. The Chinese government arrested 82 suspected terrorists in Xinjiang this year for allegedly plotting to split Xinjiang from Beijing's rule.

Diminished Capability?

To be sure, the group may be incapable of large-scale attacks that could disrupt the Olympics, Kurexi Maihesuti, vice chairman of the Xinjiang provincial government, told a briefing in Beijing on Friday.

``There have been a limited number of disturbances by East Turkistan forces in Xinjiang, and their capability is very limited,'' he said. ``These terrorist groups aren't at all as capable as some media have portrayed them to be.''

The chances of a terrorist attack at the Beijing Olympics are ``very small,'' the Beijing games' risk-management director Zhou said today.

To contact the reporter on this story: Nerys Avery in Beijing at Navery2@bloomberg.net

Last Updated: August 4, 2008 03:35 EDT