Dali is one of the most popular stops on the Yunnan backpacker trail — a walled old town set between the Cangshan Mountains and Erhai Lake, with a mild climate, cheap guesthouses, and a pace of life that encourages staying longer than planned. It once had the reputation of being a second Kathmandu, and while mass tourism has changed the character somewhat, the Bai minority culture, the mountain backdrop, and the lake still make it a compelling place.
The old town (Dali Gucheng) is a grid of stone streets lined with traditional Bai architecture, craft shops, and cafes. The city walls and gates are intact, and the view from the South Gate across tiled rooftops to the mountains is one of the best in Yunnan.
The Three Pagodas (San Ta Si), four kilometres northwest of the old town, are among the oldest surviving structures in southwestern China — the tallest dates to the 9th century and stands 70 metres high. The view across Erhai Lake with the pagodas in the foreground and mountains behind is the defining image of Dali.
Erhai Lake itself is worth a day or more. You can cycle around parts of it, take a ferry across to fishing villages on the eastern shore, or hire a boat. The Cangshan Mountains offer hiking trails and a cable car to the ridgeline.