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This paper examines the construction of Bai ethnicity and Bai identity on the tourist market in Dali, Dali Bai Autonomous Prefecture, Yunnan, China. Focusing on how the social landscape of Dali has changed in response to the development of tourism, this paper explores how Bai ethnicity is advocated as a product loaded with potential economic values. The author discovers that 'commerce of authenticity' (T. Oakes, Tourism and modernity in China. London, Routledge, 1998), and different forms of ethnicity and artefacts promoted in the tourist market have not drowned out the sense of being ethnically Bai. Instead, the tourist industry has become a daily reminder of ethnicity to both insiders and outsiders by making people more self-conscious and reflexive about the 'cultural stuff' that they may have previously taken for granted, or may have left unattended. This paper demonstrates how locals actively appropriate state-defined categories and reshape them into the repertoire they desire. [ABSTRACT FROM AUTHOR]