"The annual report, largely based on unconfirmed media reports and groundless allegations from outlawed groups and organizations with ulterior motives, is nothing but a political tool used by the U.S. government to exert pressure on other countries, mostly deemed as its rivals," it said.
China said that religious freedoms were protected under the country's constitution and claimed that only a handful of "cults" and "extremist religious organizations" were illegal.
Furthermore, China said the report was "full of prejudice, arrogance and ignorance."
Undeterred, Clinton said a country's verbal responses would not compensate for what is actually occurring within their borders.
"We are going to judge by actions, not words," Clinton said during her remarks at the Carnegie Endowment for International Peace in Washington, D.C.
The secretary of state also touched on the recent changes in Egypt and whether Islamist leaders who are now in power would implement their comments on respecting the rights of all religious minorities in the Arab country.
Early in her remarks, Clinton referenced what is known as Article 18 of the Universal Declaration of Human Rights. The language in the document applies not only to the United States or western countries where religious tolerance is more widely accepted, but to the international community too. The report reads in part:
"Everyone has the right to freedom of thought, conscience, and religion. This right includes freedom to change his religion or belief and freedom either alone or in community with others and in public or private, to manifest his religion or belief in teaching, practice, worship, and observance."
The report also touched on what is termed a "global increase in anti-Semitism," more legislation that would restrict the rights of minority religions and the use of new technologies – including social media sites such as Facebook and Twitter – as tools to communicate religious expression.
As the most widely travelled secretary of state in America's history, Clinton said she has witnessed the impact of religious freedom and how it can provide developing nations a path to social and economic growth.
"I have seen firsthand how religious freedom is an element of personal freedom – and of social advancement," said Clinton.