This article holds that Fei Xiao-tong's 1939 classic study Peasant Life in China marks the inception of Chinese social theory, a theory which was further developed by Fei and his colleagues in the 1940s and revived in 1980s. the article begins with a discussion of Peasant Life and goes no to argue that Chinese social theory is unique in that it presupposes no dichotomy of "traditionality vs modernity," which is characteristic of almost all classic Western social theories. This character of Chinese social theory is most strikingly revealed in its view of the relation between traditional and modern industry, as it argues that the basic organizational principle underlying Chinese traditional industry-that of individual enterprises diffused among millions villages-should still be the principle of development for China's modern industry. That is, the greater part of China's modern industry must be decentralized and established in villages or in centres near villages, instead of concentrated in modern urban centres. The sociological implication of this view of industrialization is that China's path to modernization does not necessitate the destruction of traditional rural communities, as was the case in the West. Another principle of social reorganization formulated by Fei is that co-operative socio-enconomic organization among villages, rather than private capitalist enterprise, should be the foundation of modern economy and society. In short, Chinese social theory, as initially adumbrated in Peasant Life, is based upon two principles: the modernization of China's industry in a decentralized way, and the reorganization of Chinese society in a co-operative mode.