Blazing Cat Fur has the background, and at London's Daily Mail, "Racist? My song's just a blend of East and West, says Kung Fu Fighting composer":
Yesterday the song’s writer and original performer Carl Douglas described the decision to arrest Mr Ledger as ‘political correctness gone mad’ because the song was not racist.
‘The arrest is a little unbelievable because there’s no racism in the song,’ Douglas, who is now 68, said. ‘It’s very strange indeed. ‘I’m very proud of the song. Everyone told me that a fusion of the west and east couldn’t work and I said “no, it can”. I have cousins that are Chinese in Jamaica, so I knew it could work.’
He said he has met thousands of Chinese fans of the hit and had even been asked to perform it at the Olympics in Beijing.