"This novella slanders Mao Zedong, the army and is overflowing with sex," said a banning order that prompted Yan to scale back his subsequent book, The Dream of Ding Village.
Now the author fears he sacrificed too much.
"My greatest worry is that self-censorship has drained my passion and dulled my sharpness," he says.
However, he sees some improvements in the censorship climate. In 1994, when his first novel was banned, he was forced to write self-criticisms for four months. Now, there are no personal repercussions and his work is published overseas. The first English translations of his novels are expected next year.
"My work has caused more disputes than those of any other author in China. But the attacks on me have become fewer. I think this shows that in many respects, society is improving, reforming, developing," Yan said.
Yan is never going to be a cheerleader for China's development. It would go against the grain of a self-taught peasant whose novels are rooted in the soil.
He feels different from other writers.
"Contemporary Chinese literature is gripped by a desire for popularity. It is like a soft-bone disease," he said. "But I come from the bottom of society. All my relatives live in Henan, one of the poorest areas of China. When I think of people's situation there, it is impossible not to feel angry and emotional. Anger and passion are the soul of my work."
Far more than any of his previous novels, The Dream of Ding Village is rooted in reality, yet Yan says it is no less surreal.
Absurd
"What I saw was more absurd than what I could imagine," he said. "No novel has ever made me feel sadder. This may not be the best piece of literature I have written, but it is the one that brought me the most pain. Even now, months after I finished, I am drained. I cannot bring myself to start another book. The situation in the village was so desperate."
Yan became interested in the subject when he was asked to sponsor two AIDS orphans in 1995. One died before he paid the first instalment, the other soon after.
For research, Yan went undercover as the assistant of a Beijing anthropologist to study one of the worst-hit but least-known villages. The locals told him that at the height of the blood-selling frenzy, they ran out of utensils and so used soy sauce bottles, and used plastic bags to store the blood.
With the money, they bought houses and electrical appliances, and paid for marriages. Some peasants sold so often that they became dizzy and had to be turned upside down to get the blood into the tubes. Years later, one by one, they started dying of AIDS.
There is no grimmer illustration of how China's short-term rush to get rich has drained natural resources and contaminated human lives.
"I think the AIDS epidemic in Henan is a warning from God that we are developing too quickly. We just haven't realized it yet," Yan said.
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