The historical Dali Kingdom (937 - 1254 AD) was located in the peripheral area of what is now known as Yunnan Province of China. Its territory spanned outwards from Erhai Lake, roughly covering the current province of Yunnan, southwestern Sichuan and northern Myanmar. According to history, Duan Siping conquered the Nanzhao Dynasty in 937 AD and established the Dali Kingdom. Due to its worship of Buddha, Dali was also known as "The Kingdom of Incense", with many of its 22 emperors giving up the throne to become monks, illustrating the religion's profound influence on the empire.

In 1253 AD, the Kingdom of Dali succumbed to the forces of the Mongol Empire led by Kublai Khan. The present Dali Old Town was restored according to early Ming architecture, and is surrounded by a moat with a radius of 6km which is square in appearance, as well as by city walls which are 8m high and 7m thick. Erhai Gate, located on the east city wall, faces Erhai Lake, while Cheng'en Tower to the south watches over Dali City's busiest route and Cangshan Gate to the west sits at the foot of the mountain it is named after.

Although the Dali Kingdom is now long gone, Duan Liansu, a descendant of the Duan bloodline in his 70s, continues to watch over Duan Siping's former residence silently. He relives his ancestors' days of glory through compiling his family tree. Meanwhile, the fisherfolk living alongside Erhai Lake have carried on the thousand-year-old tradition of cormorant fishing.

Furthermore, a village named Nuo Deng, which sustained the kingdom's economy with its abundance of salt, was discovered to the west of Dali Old Town. Its ancient salt wells, passageways for salt transportation by horse, traditional salt production methods, and even residences from the Ming and Qing periods, have been preserved. The village is one of very few in western Yunnan which has been kept in its original state, and is steeped in the charm of the Dali legacy.
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