So the first thing that we must understand is that the term yellow had a significant place in Chinese history and the term yellow race did not necessarily originate from Europe. Louis XIV viewed a Chinese citizen in his court and described him as a 'young Indian.' Often the Chinese were described as a similar complexion to Europeans with a few exceptions for residents of southern China.

But, back to the concept of yellow in China. Yellow is considered one of the five 'pure' colors in ancient China and had been symbolic of the Emperor (especially the Emperor of the Middle Kingdom). It was claimed by many Chinese that they were descendants of the Yellow Emperor and originated from the valley of the Yellow River. With the invasion of the Manchus the idea of a Yellow culture appeared (There was a book called Yellow Book written by Fuzhi a seventeenth-century scholar).

Frank Dikotter argues that the Chinese were active participants in creation of the idea of a yellow race. Primarily, he argues that the idea of a yellow race was not simply 'white racism.' It was an identity that became used for anti-Manchu and eventually anti-European movements. Racial discourses worldwide were not simply European created and authoritative narratives but much more complex.

Source: "Racial Discourses in China: Continuities and Permutations" by Frank Dikotter.