This article investigates the tensions that emerge when transnational identities are juxtaposed against claims of multiculturalism and de facto assimilation processes. The article focuses on the resettlement of co-ethnics who arrived in China through forced migration between 1949 and 1979 and the generational transitions of their descendants. The Chinese state resettled these forced migrants from Southeast Asia on state-owned farms known as the ‘overseas Chinese farms’ and gave them preferential treatment as ‘returnees’ rather than ‘refugees’. They retained transnational cultural identities which set them apart from the China-born Chinese and suffered further stigmatization during the Cultural Revolution. This article highlights the limitations of using ethnicity as a lens for understanding how ‘difference’ is negotiated in China. In contemporary times the (multi)cultural identities of the refugee-returnees are promoted for the purposes of tourism to help reinvent the farms for economic sustainability. Yet the identity transitions experienced by the children and grandchildren of the refugee-returnees suggest that they are assimilating a national identity that subsumes their overseas Chinese cultures, serving to normalize a Chinese identity associated with the locally born Chinese instead. The article argues that the objectification of overseas Chinese heritage and assimilation ideology work together to selectively highlight China's historical connections to its co-ethnics abroad while simultaneously projecting a new national narrative of contemporary Chinese identity that is distinct from the overseas Chinese. This article on Chinese forced migration and resettlement provides useful insights concerning the negotiation of transnational identity with respect to multiculturalism and assimilation, and further suggests new directions for overseas Chinese studies today.