The old town of Dali is certainly the most important historic town in entire Yunnan. The site, nestled securely between the mountains and Erhai Lake on a fertile plain with plenty of water running down the slopes of the Azure Mountains to grow rice, was probably inhabited in Neolithic times as some relics on the slopes show.
Dali rose to real importance from the seventh century AD when it became capital of the Nanzhao Kingdom and the subsequent Dali Kingdom, controlling not only western Yunnan but areas far beyond.
When Kublai Khan invaded Yunnan in the thirteenth century, he aimed for Dali, the centre of power and wealth south of the Yangtze. But when Kublai Khan then made Kunming capital of the newly integrated Chinese province, Dali’s political power waned. But with its location just north of the crossroads of the two most important caravan routes, east to west, Sichuan to Burma, and south to north, the tea regions to Tibet, Dali remained the most important town in western Yunnan.
Plenty of guesthouses in Dali and even during busy times it is possible to get a room at short notice - at a price. For those looking for quiet places, the area in the northeast of the old town has a selection of family run places. Backpacker hostels can be found across the main road on the Cangshan side. As of early 2017, all hotels and restaurants near the lake have been closed on government orders.