Through a careful analysis of Lei Jieqiong's master's these of 1931, this article looks at how American-born Chinese learned to understand racial inequality in American society, transcended their American mindset, and developed a new identity. For many American-born Chinese, self-loathing was an early stage of their identity formation as they felt ashamed of being Chinese. They acquired the cultural values of white Americans, replicated their social manners and behavior pattern, and believed that only assimilation could make them accepted by American society. But being culturally American did not make them an equal American in a racially stratified society. An even more painful reality for them was the routine rejection they faced in the American job market. A college education did not help them get a professional job. Thus returning to China became a realistic choice to make. More than finding better opportunities, returning to China was an experience in which American-born Chinese invigorated their connection to ethnic roots and built a new identity. Their experience may serve as a mirror to the contemporary Chinese American youth and help the latter understand that being culturally American is different from being ethnically American.