This novel - a masterpiece of desolating intensity - reads like reportage from hell. The setting is an industrial city in northern China, its regimented housing blocks cramped, overcrowded and dilapidated. The date is 1979, two years after the death of Mao Tse-tung, whose giant statue still dominates the city's skyline.

Beginning in late March and ending on May Day, the novel is short in time span but vast in scope. Its first section, packed with mountingly horrific revelations, covers the day on which Gu Shan (a young woman who has spent 10 years in prison as a counter-revolutionary, then been unexpectedly retried and sentenced to death) is executed. The second section, in whose background are rumours of liberalisation in Beijing, centres on a protest rally against the killing. In the third, relieved to hear that the old guard have regained control in the capital, the local authorities unleash savage reprisals. Around this swift, stark sequence of events, Yiyun Li opens up dark vistas into a world of suffocating oppression and the intersecting lives of figures struggling to survive within it.

Published not long after Li started to write in English, A Thousand Years of Good Prayers (2006), her award-winning debut book of short stories, displayed a notable talent for instantly believable characterisation and penetrating fictional engagement with the political and social upheavals that have convulsed China (Li lived there until the age of 24). Even so, The Vagrants comes as a remarkable surprise. Not just viscerally powerful but emotionally and psychologically complex, it is a novel that feels as if it has been generated by fierce anger, then developed over time into a work of icy control. As indeed it seems to have been. In 2003, Li wrote an accusatory article about a chain of real-life atrocities in China: the execution of a young woman who had served 10 years in jail, the removal of her kidneys before she was shot as transplants for a party elder, the obscene violating of her corpse, and the brutal punishing of objectors to the killing, especially another young woman who was one of the ringleaders.

Six years later, in The Vagrants, these outrages serve as extreme instances of a barbaric status quo. Hardened to abomination by revolution and “re-education”, most people here respond to the cruelties with macabre matter-of-factness. At the “denunciation ceremony” where Shan is paraded before her death, women knit and gossip, schoolchildren tuck into snacks prepared by their parents and a couple who have spent the night making love seize the chance to catch up on sleep. In a society still close to famine, it is taken for granted that the flour-and-water paste on posters announcing the execution is likely to be scraped off and hungrily licked up (connivers in the transplant scheme meanwhile enjoy a celebratory blow-out in the banqueting room of the Three Joy restaurant and receive television sets as thank-you presents). Chilling bureaucracy prevails: billed for the bullet that kills his daughter (24 cents), Mr Gu files away the receipt.

When the prisoner finally makes her appearance, dragged into view like a sagging dummy, with bloodstained surgical tape around her neck where her vocal cords have been severed to stop her shouting counter-revolutionary slogans as she dies, we see her through the uncomprehending eyes of a seven-year-old country boy. Brimming with idealism and zest, eager to win esteem by meritorious deeds, he is destined to make a terrible mistake that will lastingly maim his and his parents' life. Other warped and wasted existences come to the fore, too: a girl born deformed after her mother was assaulted by Red Guards, an unstable teenager damaged by his pampered upbringing as the son of a supposed national martyr (actually a coward who died from an accident with anaesthetic during dentistry).

Episodes about two old folk who eke out a living as rubbish collectors exhibit more literal specimens of squandered lives. Among the heaps of garbage, they keep finding tiny smothered corpses of unwanted baby girls. Subservient and beaten wives, bullied daughters, exploited mothers and grandmothers further swell the novel's indictment of the misogyny disfiguring and degrading the society it portrays.

Running reading and writing classes for illiterate women is one of the ways by which Shan's father, a mannerly intellectual, has managed to weather the political and ideological storms. His painful descent into nihilism and despair during the novel isn't, it gradually transpires, because of his daughter's execution but because he knows she became a monster long before it: a shrilly fanatical Red Guard who viciously kicked a nine-months-pregnant woman, whipped citizens guilty of compassion (“It seemed that being human was reason enough for humiliation”) and applauded the battering of an old lady about the head with a nailed club. “She died of a poison that she herself had helped to concoct,” is Gu's epitaph on his daughter (who was betrayed to the authorities by her boyfriend in return for admission to the army and its perks).

Unsparing refusal to simplify or sentimentalise her characters is also apparent in Li's presentation of Kai, a young news announcer (and, as “voice and throat” for the party, a telling contrast to silenced Shan), who throws herself into the protest movement. What motivates her, it emerges, is less zeal for justice than thwarted love for a fellow campaigner and jaded revulsion at the meaningless marriage and truthless profession she has blundered into.

In its acute tracing of ambivalences and unexpected twists and turns in people's motivation and behaviour, The Vagrants can put you in mind of Tolstoy or Chekhov. Its scenes of characters “trapped between practicality and conscience” in an authoritarian society, where frustration routinely finds vent in aggression, insult, sadism and spite, bring to mind fictional bulletins from East European communist regimes. Its mass rallies wouldn't be out of place in Margaret Atwood's dystopia, The Handmaid's Tale. Most of all, though, its shut-in, shabby world of party tyranny, nonstop surveillance and loudspeakers spouting propaganda into the smoky air resembles Orwell's Nineteen Eighty-Four - with a grim twist: Orwell's novel envisaged a nightmare that could happen; Li's describes one that did.

The Vagrants by Yiyun Li
Fourth Estate £12.99 pp352

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