The article attempts to describe Islam in China in terms of Chinese psychology and the Chinese culture’s style of adding new cultural material. The article highlights some elements of the cultural configuration thanks to which it is possible to observe interpenetration of two cultural complexes as the natural from the psychological point of interpenetration. Such elements include, for example, folklore and martial arts. Both folklore and martial arts as part of the cultural system in China play a significant role in the functioning of folk culture, used as “soft power” in the intercultural and interreligious dialogue within the People’s Republic of China and beyond its borders. The reason why the folklore elements and martial arts are considered as important in the given context hides in their role in Chinese cultural history. It is obvious that folklore is one of the basics of ethnic group genesis and identification. Chinese and Islam culture co-existence leads to the rejuvenation of folk tradition by means of introducing a new character recognizable for the domestic population. As for martial arts – it is a kind of way of narrating Chinese culture, natural and essential for people inside country and, in its turn, recognizable for external viewers. The methodology used in the analysis of materials is interdisciplinary. In the general framework of Cultural Studies the methods of Cross Cultural Psychology, Cultural Anthropology, and the Psychology of Religion are applied. The mixed methodology, based on the concept of cultural configuration, gives a focus on the combination of Chinese traditional and Islamic culture as objectively existing, living and natural.