ZAMBOANGA, Philippines (AFP) – A Chinese shopkeeper held hostage by Islamist militants for nearly 19 months in the Philippines has walked free after his abductors clashed with police, officials said Tuesday.

Wu Xili, an illegal immigrant who also goes by the name Peter Go, was rescued after a firefight with Abu Sayyaf militants on Jolo island late Monday, regional military chief Lieutenant-General Ben Dolorfino said.

"The rescue operation was initiated by local police in the area," Dolorfino told reporters, confirming that the 28-year-old was now in government hands and uninjured.

Police said there were no reports of casualties on either side after the 10-minute firefight. They said they recovered two rifles, a grenade, and machine-gun bullets from the scene of the clash.

Police said the Abu Sayyaf, blamed for the worst terrorist attacks in the Philippines, snatched Wu in December 2008 shortly after his family migrated to the troubled south of the country from China to set up an appliance store.

The gunmen at one point demanded P10 million ($215,285 dollars) in ransom, though it was unclear if any amount changed hands.

Local authorities rarely acknowledge paying ransom, which is against government policy.

Last month police rescued an elderly Swiss man abducted by the Abu Sayyaf from his home near the southern city of Zamboanga in April.

The Abu Sayyaf is a small group of Islamic militants on the US government's list of foreign terrorist organisations that is well known for staging kidnappings for ransom in the southern Philippines.

Remote Jolo island is regarded as one of the Abu Sayyaf's strongholds and it is regarded as extremely dangerous for foreigners to travel there.

In one of their most notorious acts, the Abu Sayyaf beheaded one of three American hostages they seized from a resort on Palawan island in 2001. One of the other hostages was killed during a rescue attempt over a year later.

The group is also blamed for the 2004 bombing of a passenger ferry that killed over 100 people in Manila Bay.