“If I were a debut writer, I wouldn’t have dared to write this book,” Rebecca F Kuang says from her home in Boston. Then again, she wouldn’t have been able to. Her new thriller, Yellowface, could only have been written by an author familiar with the idiosyncrasies of the publishing industry: its petty politics, its bad faith, its best intentions gone hilariously awry. In the novel, which tells the story of a white writer who claims a dead Chinese friend’s manuscript as her own, the industry’s dark side is satirised with delicious cynicism: how authors are questionably packaged and marketed; how bestsellers are often selected in advance and boosted with money long before they hit the shelves; and how marginalised authors and staff are ignored, belittled and underpaid. An Instagram post earlier this year shows the 26-year-old author holding up an early copy of the book, showing its eye-catching lemon yellow cover; it is captioned “in 2023 we get mad spill the beans and don’t care”.

Kuang first made her name with the Poppy War trilogy, an award-winning fantasy series that explores the idea, as she puts it, “what if Mao had been a teenage girl?” Set in a country resembling medieval-era China, it tells the story of Rin, an ambitious girl from the southern peasantry who enters the nation’s most prestigious military academy. Many events in the trilogy are inspired by 20th-century Chinese history: like her historical counterpart, Rin battles occupiers from a neighbouring island in the east; builds a guerrilla peasant insurrection, complete with a long march through the country; and spars with a more established rival backed by western powers. That was followed by the bestseller – and runaway BookTok hit – Babel, which follows a group of language students at Victorian-era Oxford University who get drawn into the first opium war. There’s magic, there’s intrigue, and there’s imperial England, grand, glittering and increasingly troubling to some of the students, who find themselves struggling to simply go to the balls and sip the champagne.

Kuang drafted Yellowface in the summer of 2021, a time of lockdown “when all the isolation and desperation and depression was reaching a peak”. Unlike her previous historical fantasies, it is strikingly topical: it includes sensitivity readers, Twitter pile-ons and professional jealousies thinly disguised as socially minded critique.

“I get bored really easily,” Kuang says, an array of books on the shelf behind her, next to what looks like a fluffy toy cat. “I’m never going to write a project in the same genre twice, because there are just too many forms of storytelling that I want to experiment with, and not enough years in my life.” Yellowface was written just after she submitted Babel, which she describes as a “chunky, pondering Dickensian bildungsroman”; looking for a dramatically different project, she alighted on a “zippy” satire for the social media age. The dramas of the literary world seemed like a perfect fit. “Publishing, like many entertainment industries, is so full of drama,” she says. “I think writers are particularly good at taking small scandals and blowing them out of proportion.”

The industry at the time was coming to a reckoning with its track record on race, sparked by the global Black Lives Matter protests: online, there were discussions about which stories were being told, who was getting paid more, who was getting promoted. Yellowface’s protagonist, who describes herself as a boring “brown-eyed, brown-haired June Hayward from Philly”, is viciously jealous of fellow writer Athena Liu, a “beautiful, Yale-educated, international, ambiguously queer woman of colour”, whose education in British boarding schools equips her with “a posh, unplaceable foreign accent”. “Publishing picks a winner,” June thinks; Athena, with her string of bestsellers, is the anointed one. After Athena suddenly dies, June discovers a manuscript she had been working on, about the 95,000-strong Chinese Labour Corps who supported Britain in the first world war. It’s intimidatingly good. When June polishes it up and passes it off as her own, the book shoots her to literary stardom.

Reviewers then debate June’s right to tell the story, echoing familiar conversations on whether authors should write about characters and histories outside their own race or lived experiences. In Yellowface, that initial query spirals into increasingly outlandish backlashes, and everything that was once coherent and proportionate disappears under a mountain of tweets. Kuang’s view, however, is clearer. “I really do not like this framework,” she says. Concerns about “who has permission to tell these stories, or who has the right, or who is qualified” seem like “the wrong questions to ask”.

“We’re storytellers, and the point of storytelling is, among other things, to imagine outside of your lived experience and empathise with people who are not you, and to ideally write truthfully, and with compassion, a whole range of characters,” she continues. “Otherwise all we could ever publish are memoirs and autobiographies and nobody wants that.” For her, more interesting is how authors approach these stories: “Are they engaging critically with tropes and stereotypes that already exist in the genre? Or are they just replicating them? What is their relationship to the people who are being represented?” And, “most importantly, does the work do something interesting? Is it good?” While some concerns about the “permission to speak” come from desires to support underrepresented authors, Kuang thinks it “usually gets wielded as a double-edged sword against marginalised writers, to pigeonhole them into only writing about their marginalised experiences. And I hate this. It really functions as another form of gatekeeping.”

Besides, Athena Liu – wealthy, celebrity-adjacent, who writes on a bespoke typewriter in her gorgeous New York apartment – is an awkward emissary in her own right for the Chinese Labour Corps, many of them indigent farm labourers who were later airbrushed out of monuments to the international war effort. Her character complicates superficial approaches to diversity in the industry, Kuang points out.

“There is a fairly widespread sentiment by now that the most over-represented Asian Americans tend to be East Asians, light-skinned Chinese Americans whose parents are professors who went to Harvard, Yale, Princeton, et cetera,” she says, before mentioning books in Asian American studies – Lisa Lowe’s Immigrant Acts and Kandice Chuh’s Imagine Otherwise – that instead recognise a multiplicity of experiences. “There is no singular Asian American experience, and studying Asian Americans just means studying all of those different waves of migration.”

Her character Athena is “completely oblivious about her class privilege”, she says, describing her as an “Asian American who thinks she is representative of everybody”. Kuang deliberately includes a scene in which Athena expresses her dislike of mentoring younger Asian American writers, to show how “she’s realised that her value [in the literary world] is being able to explain Asians to everybody else, which is partly why she’s so threatened by and dislikes younger writers who reach out to her”.

Kuang credits her own mentors for teaching her how to “survive online”, and her family for encouraging an early love of storytelling. Born in the southern Chinese city of Guangzhou to parents who immigrated to Dallas, Texas, when she was four, she grew up in a “very literary household”.

Her father, a voracious reader, would print out copies of novels in the public domain, staple the pages, and read them with her. “We’d sit down and read Pride and Prejudice together. That is how I learned English.” At 11, she was introduced to Animal Farm (“I thought it was a fun bedtime story about animals in a farm being ridiculous”) and Nineteen Eighty-Four (“I had no idea what the novel was really about”). Meanwhile, her primary school had an annual writing programme in which parents would help type up students’ stories, and bind them into manuscripts – to her, it was “the most exciting thing”. In her final year, she submitted a 10-page story about a soldier fighting the British during the American Revolution. “I was 10 years old. And the title is Liberty or Death. So that tells you everything.”

Storytelling began as a way to “assimilate: to learn English”, and to understand her new home. “I didn’t conceive of it [as such] at the time,” but in retrospect, it was driven by a need to discover “the mythological landscape that white Americans, or white Texans, live in”.

She was, and still is, most drawn to fantasy books. “When you’re a little kid, you aren’t really thinking about genre distinctions,” she says. “The world of the Percy Jackson series and the world of Nancy Drew were all equally foreign to me and equally fun to play around.” Titles like “speculative fiction” and “literary fiction” read like “artificial industry labels” to Kuang. “It really does not make sense to categorise books this way. Kazuo Ishiguro: you’d never find his books in the sci-fi fantasy section, but The Buried Giant is clearly fantasy. And Never Let Me Go is dystopian science fiction.”

Kuang began writing the Poppy War trilogy at 19, during a year off from her studies in Chinese history at Georgetown University. She was in Beijing, teaching students how to debate during the day, and wanted a way to pass the time in the evenings. That year, she began learning more about her family history. Kuang’s grandparents lived through the second Sino-Japanese war; her father was a Beijing university student protester at Tiananmen Square in June 1989, and saw his friends die.

Did she know much Chinese history before university? “I knew nothing,” she replies, other than being vaguely aware that “Chairman Mao was a person, and the Cultural Revolution had happened. But we had no understanding of what that actually meant, or what a deep impact it had had not just on our family, but almost every single Chinese American immigrant family.”

Some Chinese American families, Kuang says, “try to leave their ghosts behind them, and the journey to the US marks a clean break”: there’s a sense that “from now on, we’re Chinese Americans, we’re not Chinese any more, that history, that baggage, doesn’t have to affect us”. She understands the impulse. “I’m very sympathetic to this attitude because who doesn’t want to make a fresh start?” But as a result, “you have a lot of young Chinese American readers who have no idea what happened to their families, because their parents won’t talk about it with them. And that doesn’t mean the trauma goes away. It still exists, it’s just unspoken.”

She considered exploring her family history through biography but realised that would have involved making people relive their pain. Fantasy, however, gives the mind more space to roam, creating a familiar yet distant universe with its own logic, hierarchies and possibilities. “I’ve met a lot of readers who thought reading the trilogy was kind of a cathartic experience,” she says. That many then went on to read nonfiction Chinese history books “warms my nerdy heart”.

Today Kuang is studying for a PhD in Chinese literature at Yale University (she splits her time between New Haven and Boston). She was previously a master’s student at Cambridge, then Oxford, where her studies were cut short because of the pandemic. “I never got a sense of closure with Oxford, which is why I think I have written about it incessantly,” she says of her 2022 novel Babel.

She doubted whether it would be popular – “so much of that book is just etymology lectures”, as well as a bracing critique of the British empire – but it was quickly embraced by TikTok, particularly by “dark academia” enthusiasts, an internet subculture celebrating knee-high socks and black robes, gothic spires and reading Keats by candlelight. University, Kuang says, “is this really exceptional time, when you’re forming your own identity as an independent adult. And you’re in this very artificial, closed environment with other unformed souls figuring things out at the same time. So it’s a place where this magical alchemy of friendship happens.”

In Yellowface, June looks over the stories she wrote as a teenager and reminisces about a time when writing was full of joy and freedom, rather than dominated by competition, gossip and self-promotion. “We don’t talk enough about what the contemporary literary world does to writers’ mental health,” Kuang says. “We live in a particular moment where everyone’s more interconnected than ever, but also more isolated than ever. At any given point, you can just log on to the internet and find out what thousands of people are saying about you and your work.” There’s the endless hustle: comparisons over Goodreads ratings, the marketing budget your publisher has set aside for you, how many posts they’ve made about your book on Instagram. That authors are expected to go through the process and remain “completely unfazed and grounded” is a “ridiculous requirement”, she says. “It’s absolutely soul-shattering to have yourself, your identity, and something you’ve spent years pouring your heart and soul into be dissected and critiqued online in ways that you never intended.”

Kuang remains cynical about the publishing industry, pointing to how pledges made in 2021 to support diversity have fallen through. “In the end, it was a lot of chatter, but no substantive support for those authors, no real commitment to diversify lists, or the faces of people working on the other side of publishing.” Staff at HarperCollins, her publisher, went on strike for better pay and working conditions while the novel was in production – Kuang has co-hosted strike rallies for the union. When I ask her about her hopes for the publishing industry, and for her own writing going forward, her answer to the first is immediate: “I hope everyone unionises.”

And for herself? She’s working on another book, called Katabasis. She tells me she’s thinking about “nonsense literature”, by which she means Alice in Wonderland-esque stories set in worlds that “don’t make sense”. She’s also interested “in paradoxes of rational choice and decision making”, and “how you can make a series of decisions and, every step of the way, think you are headed towards a better outcome and then find yourself worse off than you were before”. (This, she says, is “a good metaphor for grad school”.) And lastly, power, relationships, and abuse within the academy. “Academia is this bizarre, closed world in which if you cross one person, they can ruin the rest of your life.” The question of what to do when you’ve been so worn down by it forms “the beating heart of the novel”.

She doesn’t divulge much about its plot – though confirms, contrary to some online discussion, that it is not a romcom. But it is clear that her next work will be a dramatic departure from Yellowface. “As long as I’m passionately curious about a topic, at least one other person is going to follow me down that rabbit hole,” she rationalises. If it is difficult to tell what she’s going to do next, then that is the point, she says. “It’s only going to get weirder from here.”

• Yellowface is published by HarperCollins on 25 May. To support the Guardian and Observer, order your copy at guardianbookshop.com. Delivery charges may apply.