The controversial footage was taped following the 2008 Beijing Olympics for the talk show Closing Time and features Megan repeatedly referring to the Chinese people as "C***ks".
Watch Megan Lochete Torrini's talk show appearance below:
Megan also mocked Chinese citizens for driving "like ninjas" and drew on stereotypes by saying they "take pictures of everything", as the host nervously laughed.
Gold medallist Ryan's sister Megan has now released a statement to clarify that she was playing a character in the now-notorious sketch.
"I would like to apologise for the video that is circulating on the internet from 2008. During that time, I played a character on a television comedy show called Closing Time TV, which was a show with different comedy skits, fake news skits, staged interviews, etc.," Megan said, reports E! News.
Her statement continued: "The video in question reflects a skit from the show in which I acted as an ignorant guest on a talk show that made ignorant comments.
"This was not a real interview, and it in no way reflects my true feelings or persona whatsoever. The intent was to make fun of the ignorance of people who actually do not have an understanding of other cultures and speak in racist ways. The skit and my character were SUPPOSED to be making fun of ignorance. It was never the intent to make fun of any culture or class of people."
She concluded: "Comedy in general can be offensive, yet spread awareness. I do see how it was highly offensive to the viewer, but as seen by today's widespread outrage, it clearly did increase awareness of the ignorance of those who are racist.
"I want to reiterate that this was NOT a real talk show, and I was not expressing my personal views. While the intent of the script was to shed light on cultural ignorance, I realise that in application it did offend people, and for that I apologise."
Ryan - who won five medals in all at the 2012 London Games - has not issued any comments on his sister's controversial sketch as of yet.
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