"The growth of sport's status in school life in our country has halted now," the giant former Houston Rockets center told the China Daily newspaper.
"We should start over and let it go beyond just a function (for) keeping (students) fit."
With the inaugural season of Yao's "Foundation Hope" elementary school basketball programme recently concluded, he has been making a considerable push of his own.
Yao's foundation had reached some 27,000 students from 47 schools in 17 cities nationwide, providing sports facilities and basketball coaching, according to the China Daily.
"The development of school sports activities in China remains small," said Yao, who retired from the professional game last year after two seasons battling serious foot injuries.
"Sport still lags far behind studies in terms of importance in students' school lives," said the 31-year-old, who became one of Asia's biggest sports personalities while in the NBA.
"Sport should play a much bigger role in school life for kids than it does now. By taking part in sporting activities, kids can be more confident and happier."
Chinese students face heavy pressure from the national college entrance exams and most of the nation's high schools bump sport from the curriculum in the run-up to the tests.
Yao, however, wants China to follow the American blueprint.
"When I remember primary school, the first thing popping into my mind is the playground," said Yao, who established his foundation after the deadly Sichuan earthquake in 2008.
He has helped build 14 schools around the devastated area and insisted balls, rackets and baskets should be supplied for the students, along with books.
"I expect to organise similar events to (fill) my campus with sports activities," Yao added.