First, two caveats on this write up. I am not a very experienced martial artist, and therefore I can't claim to have any deep psychological insight into what the psychological state of a well trained martial artist is.
My second warning is that I am sure someone will point out that many cultures besides the Chinese have had at various times developed martial arts. If martial arts were studied in the same way as other arts by academicians, I am sure we would have heard a revisionistic history that, for example, Gong Fu was not really invented in the Shaolin Temple by Han, but was instead actually developed by Uigher horsemen. However, in this essay, I am going to assume that while many other nations have at one time or another developed a system of fighting, the only place where the idea that all people can be taught how to fight in a systematic way ever occured was in the Central Kingdom.
My thesis, then, is that martial arts developed in China because of the Confucian idea that people behave in understandable ways and that there are understandable, and teachable ways to deal with the way people behave. Now, of course, in the High Confucianism of the cultural elite, this meant that you learned to live in accord with other wealthy intellectuals and government officials, preferably by knowing the right poetry or literature to quote at the right time, to subtly convey what you were trying to say.
Now, of course, Confucianism permeated every level of Chinese society, including illiterate people and those who would not think of themselves as Confucian, such as Buddhist Monks. And this idea that there are sane ways to learn to deal with people, and that people can be dealt with became part of their thinking. This idea extended to the martial arts. Of course, the practice of learning how to fight in many cases would involve abandoning the Confucian doctrine that People are by nature good, and that if displaying enough good will and knowledge of poetry, people will automatically refuse to fight you. But even if fighting departs from the strict literary-centered knowledge of human nature of Confucianism, it still maintains a very rational idea behind it.
Martial arts was developed because it was believed that attackers and assailants were people, and could be controlled like people. Instead of controlling them through moral conduct, however, they are being controlled by a logical, sensical knowledge of how the human bodies reacts to being hit, damaged and locked. This may seem like an obvious idea, but both historically and for people beginning martial arts training, it is a big concept to get. Because someone is attacking you does not mean they are a demon possessed of infinite power and unable to feel any pain. Although they may be a very strong person, or a very angry person, or even an evil person, they are still a person. And, if as a person they don't respond to talk and social mores, they will still buckle when kicked in the knee, and they will still wince when poked in the eye. If these don't work (and often they don't), there are other techniques and methods to use. And if the person succeeds in hurting you, it is not because you are wrong, bad or cursed to be weaker. It is because that is what happened.
My central thesis is that the martial arts developed as a side effect of the humanist notion that people are not mysterious beings driven by mysterious demonic desires or powers, but that that people are able, with training, to be able to deal with people as they see fit.