When Yiyun Li was five-and-a-half-years-old, in day care in Beijing, she was "a problematic kid", disliked by all the aunties, as the teachers were known.

But she was especially hated by one, Auntie Wang. "I knew she hated me, but I did not know why. I feared her more than any other kid feared her; I feared her more than any other person in my life," the prizewinning Chinese-American author has written.

In an essay for The Gettysburg Review, reprinted in the paperback of her remarkable debut short story collection, A Thousand Years Of Good Prayers, 41-year-old Li tells how, in 1979 in the white heat of the Cultural Revolution, her nursery class was taken to raise their fists and shout slogans at political prisoners as they were publicly denounced. Auntie Wang made Li squat for half-an-hour, a special punishment regularly meted out to this child with the blunt, wide-eyed stare that so angered her. Later, Li discovered that forcing prisoners to squat is common practice in Chinese prisons.

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"This is a kid who has too much of her own will," Auntie Wang told another teacher. Li has no idea what made her teacher so persistent in tormenting her; she tried everything to please. Decades on, when Li was already in America, her mother met the teacher frequently in the street. Wang would always ask about Li. "I wonder if she remembers me for the same reason I remember her?" writes Li.

Probably not. Wang now suffers from dementia, Li tells me when we meet in her London hotel. She's on a visit from the California home that she shares with her Chinese-American husband, a software engineer, and their two sons, to promote her brilliantly written, intricately plotted second novel, Kinder Than Solitude, a murder mystery of astonishing profundity and depth.

Ironically, her mother still regularly encounters Wang. In 2008, on a visit to introduce her parents to her two small sons, Li saw her nursery teacher in the street. "She was walking towards me with her carer - I didn't want to be seen by her, so my mother and I turned around and walked back the way we had come; I don't know whether she saw us or not or even whether she might have recognised me."

Had they spoken, Wang would have discovered that Li, with her round-cheeked, optimistic face, still has that blunt, wide-eyed stare. It's also the unswerving, clear-eyed literary gaze that she turns on the land in which she was born and grew up, although she has no desire to be defined as a Chinese writer. She left Beijing when she was 23, arriving in the United States in 1996 to study medicine, speaking only a little colloquial English, although she'd been reading English literature in secret since childhood. She had, though, never read or written anything in the language that she now thinks, dreams and writes in; indeed, it's the language that all her Chinese characters speak. "They always talk to me in English even when they are speaking Chinese," she confides.

Since moving to America, Li has abandoned her science doctorate, enrolled at the renowned University of Iowa Writers' Workshop, published two lauded short story collections and a brace of novels, won a MacArthur Foundation "genius grant", and been named on countless lists of best young writers, including Granta's 2007 Best Young American Novelists under 35 and the New Yorker's top 20 writers under 40. A Thousand Years Of Good Prayers won the PEN/Hemingway, Frank O'Connor International Short Story and Guardian First Book awards. Her first novel, The Vagrants, was shortlisted for the Dublin IMAC Award and the San Francisco-based film director Wayne Wang has twice made movies from her short stories, A Thousand Years Of Good Prayers and The Princess Of Nebraska.

Meanwhile, her books, including her last short-story collection, Gold Boy, Emerald Girl, have been translated into more than 20 languages, but not into Mandarin. It is not because she has chosen not to have her books published in China - she has been quoted as saying she's banned translations because her work would not be understood there.

So her books would be misconstrued? Not at all, she replies. It's the footnote problem. If you read Dickens or DH Lawrence, say, in Mandarin, the pages are replete with footnotes clarifying cultural differences. In her fiction, Li weaves "footnotes" into the text to explain Chinese customs to Western readers. "I'd have to rewrite everything," she sighs. "Chinese readers would wonder why I was telling them about things they already know."

What the Chinese can't know - unless they read her in her adopted tongue in which she is so breathtakingly fluent - is that Li is unique. Her superb new novel, Kinder Than Solitude, has drawn comparisons with Charlotte Bronte's Villette, as well as Chekhov, Alice Munro and Patricia Highsmith. Actually, it is unlike any other book I've read, despite Li's calm, uncluttered prose and obvious love of 19th-century storytelling, stemming from her passion for Russian literature, particularly Tolstoy, Turgenev and, inevitably, Chekhov.

"You can't argue with Chekhov," she insists, although she enjoys disputing with Tolstoy. "I have lots of arguments with him," she laughs. However, her mentor is William Trevor, perhaps her greatest influence and inspiration. "I owe him a lot," she says.

Like Trevor and Elizabeth Bowen, another Irish writer she much admires, Li explores the interior lives of her characters with haunting sensitivity. In Kinder Than Solitude, set in both China and America over two decades, she tells how 15-year-old orphan Ruyu, one of four main characters, arrives in Beijing to complete her schooling in the aftermath of the 1989 Tiananmen Square massacre. She is befriended by three adolescents; then the eldest is poisoned, remaining in a coma for 20 years. The book opens with her death at the age of 43. No one is arrested. The survivors have drifted apart: one is an entrepreneur cashing in on China's booming economy, while the other two flee to the States, all victims of the crime.

The "very tiny seed" that germinated into the novel, says Li, was the thallium poisoning, in 1996, of Chinese college student, Zhu Ling, and the ensuing corruption of silence from the authorities. "The case remains unresolved. It's a shared memory among my generation, although my characters are teenagers not students. I'd always wanted to write about poisoning. It's such a passive-aggressive, intimate, cold-hearted crime; it's not a crime committed in passion. It's about manipulation. Four people are poisoned by this crime, which some reviewers have seen as being about the aftermath of Tiananmen Square. Which it is not."

Indeed, Li is constantly asked is whether she is a political writer. She always denies it. But isn't the personal political?

"Yes, yes, yes!" she responds. "But I think my being political is that I refuse to be [known] as a political writer. I refuse to be what people want me to be, that's my political statement. However, I would say that however much critics might write that this novel is about the legacy of Tiananmen, it is not. It's about the toxic nature of psychological violence."

Recently, someone remarked to her that she never describes her characters' appearance. "You don't tell us that Ruyu is beautiful until the novel is almost ended," she was told at an author event. "It's because I have no visual imagination," says Li, who teaches creative writing at the University of California, Davis, and is "a chicken mom", as opposed to the strict Chinese parenting advocated by Amy Chua in her controversial bestseller, Battle Hymn Of The Tiger Mother.

"I don't visualise things, so I don't do descriptions. I am not that interested in the external, more the internal landscape. I love Katherine Mansfield's short stories. She said that when she got on an omnibus, she studied her fellow passengers. I do that; I can see into people's emotions and thoughts. I almost aways know what people - yes, strangers, too - are thinking and feeling. I have a very realistic view of people. I don't mystify them, perhaps because I've been a scientist. I am so curious about people. I like to think that I am invisible to them, so that I can see how they have become the people they are."

Perhaps this is what Auntie Wang sensed in "the kid with too much will of her own". After those four counter-revolutionaries had been driven away to their eventual deaths, she walked up to the child trapped in her small unhappiness and put her hand to Li's head, in the shape of a handgun. "You see that? If you have too much of your own will, you will become a criminal one day. Bang," she said, pulling her finger as if to trigger the gun, "and you are done".

Yiyun Li is not done, of course. Instead, she carries on "interfering with history, making things up at will, adding layers to legend", enchanting those of us privileged to read her.

Kinder Than Solitude by Yiyun Li is published by Fourth Estate, £16.99