Maybe you heard this story a few years ago: In 2001 a small Tibetan autonomous county in southwest China called Zhongdian officially changed its name to Shangri-la after a local man read the British novel Lost Horizon and discovered that the mythical realm of Shangri-la depicted in the novel bore a strong resemblance to Zhongdian. It has now been a decade since Shangri-la began the process of changing its name in a move meant to draw tourists. Many expected tourism to overwhelm this remote county, with its historic old town section and nearby ethnic minority villages, and turn it into the next Lijiang.

Prayer flags flying on a hilltop at Napa Hai. [Mark Frank/China.org.cn]

To my surprise, when I finally visited recently I did not find a giant Tibetan Disney World. In fact, tourism is good for Shangri-la. The truth is that Shangri-la tourism is saving the ecology of this Tibetan autonomous prefecture.

At the end of the twentieth century, Zhongdian was facing a deforestation crisis. One of its major industries was logging, and even the slopes of Buddhist holy mountains like Meili Xueshan were vulnerable. After a series of deadly landslides, the local government decided to do something, but the only way to successfully end logging was to replace it with another source of income. Some money came from harvesting the matsutake mushrooms that grow naturally and abundantly in this area and exporting them to Japan. But the main source of alternative income was eco-tourism.

A stupa in Shangri-la's old town with an offering matsutake mushrooms drying on a sheet nearby. [Mark Frank/China.org.cn]

The transition came at the turn of the century as the central government was stepping up environmental conservation in China's western regions. The term "eco-tourism" (shengtai luyou) began to appear increasingly in government documents, and private companies and international organizations began cooperating with local government officials to develop natural and cultural attractions as tourism resources while also conserving them. Among these organizations was The Nature Conservancy, a U.S.-based environmental organization that has a large operation in Shangri-la including protection of the holy mountain Meili Xueshan.

A cosmos flower growing overlooking fields of highland barley at Hamugu Village, Shangri-la. [Mark Frank/China.org.cn]

James Hilton's novel Lost Horizon was first published in 1933, but there was no major Chinese translation until the early nineties. So when the local government discovered the similarity of Hilton's mythical kingdom to this little county in Yunnan in 1995, Hilton's novel was still very fresh in the Chinese imagination, and tourism officials realized that they could use the name to market their sites not only to foreign travelers but to domestic tourists as well. The strategy worked well, particularly in the first few years when the number of visitors more than doubled. As one early report stated, "the whirlwind of Shangri-la has engulfed China and amazed the world, and all those who believed in Shangri-la came thick and fast, competing to reach the fairyland of the world."

Highland barley (qingke) drying on racks near Napa Hai. [Mark Frank/China.org.cn]

Like the utopia depicted in Lost Horizon, Shangri-la is home to a large number of coexisting ethnic groups. Tibetans are in the majority, but there are also Naxi, Lisu, Bai and many others. One of the best ways to meet town folk is the daily circle dance – or "guozhuang" – every evening in the main square of the old town.

Shangri-la caters extraordinarily well to travelers from all over the world. At Sean's Café Number Two, a small restaurant on Beimen Street in the old town, you can buy everything from pizza, burgers and Israeli shakshouka to yak butter tea and Tibetan dumplings. It is all prepared by Daisy, a young Tibetan woman, and her sister. When Daisy first opened the café several years ago she could only make Tibetan and Chinese recipes, but over the years her international customers taught her how to prepare cuisine from their own countries. Much of her offerings are a hybrid of western recipes with Tibetan ingredients, like the yak cheese pizza I ordered. Daisy spends most of her days and evenings in the restaurant, leaving only briefly in the afternoon to pick up fresh ingredients at an outdoor market. She works hard but loves talking to guests. Often she carries her sleeping daughter on her back while she works.

Prayer wheel [Mark Frank/China.org.cn]

Daisy was living in Zhongdian in 2001 when it was renamed Shangri-la. I asked her how much the town had changed since then, and she seemed to think it was an odd question. "There are more hostels and the roads have been paved," she said. "The roads of the old town used to be dirt." But she did not think the town had been radically transformed.

In fact, tourism is probably keeping the modern high-rises to the north of town from encroaching more rapidly on the historic southern section. The old town may be touristy, but many of the people who work there come in by day from surrounding villages like Mr. Pi, a Tibetan man who invited me to his home for dinner. He lives in a three-story wood lodge with a latrine and one electric light several kilometers away from the city. He owns a couple of Tibetan mastiffs, one of the world's most prized breeds. Mr. Pi is very content with his job and his house.

International backpackers are not a new presence in Shangri-la. They have been showing up since the 1980s, when the rest of the world discovered the pleasures of hiking through nearby Tiger Leaping Gorge. The old town is decidedly a backpacker destination, with few full-scale hotels but a huge offering of low-cost dorm beds and eateries. Somehow they blend in—you can hike south to the temple on top of Dagui Mountain, home of the world's largest prayer wheel, and get a picture-perfect view of the old town with its wood shingle roofs. The name has changed, but Zhongdian has not been torn down and rebuilt.

One advantage of the name change is its mnemonic value; locals refer to Shangri-la by so many different names that you would probably need a notebook to keep them straight. The main town is technically called Jiantang in Chinese and Gyalthang Dzong in Tibetan, although in the past it was commonly referred to as Zhongdian, the name of the county it sits in, or even Diqing, the name of the prefecture. Visitors can now simply refer to "Shangri-la" (Xianggelila) to indicate the county of Zhongdian, "Shangri-la's Old Town" (Xianggelila Gucheng) to mean to the historic southern section of Jiantang, and the "Shangri-la scenic area" (Xianggelila Jingqu) to mean all of the natural landmarks in and around Diqing prefecture.

It would be a shame not to visit Shangri-la, but it would be even more tragic not to venture into the countryside while you're there. It is surrounded by natural attractions, including the Baita limestone terraces, Pudacuo National Park, Napa Hai and Meili Xueshan, each of which has been the focus of conservation efforts by the local government and international organizations like The Nature Conservancy and The Mountain Institute.

Backpackers that I met in Shangri-la raved most about Napa Hai, a relatively obscure wetlands area situated about 7 kilometers from town. At more than 3,200 meters above sea level, Napa Hai is Yunnan's largest high-altitude wetlands. Fortunately, it has so far remained virtually untouched by commercial developers. On the contrary, local families in a medium-sized village on the western side of Napa Hai called Hamugu have developed an eco-tourism co-operative, pooling their funds and energy to mark out hiking trails and build a lodge for visitors.

Eco-tourism companies based in Shangri-la's old town do trekking tours and home stays in Hamugu Village at a cost of about 700 yuan for a three-day tour including food and lodging. During the wetter months you may be lucky enough to catch a glimpse of the rare black-necked crane, but you will certainly see herds of horses, goats and yaks grazing in front of Tibetan homesteads. Lilies, orchids and asters dot the ground in soft colors, and the hills are topped with oaks, pines and spruce trees.

Seeing traditional Tibetan wood lodges might be the most fascinating part of a trip to the Shangri-la countryside; they are huge, sturdy, take years to build and are meant to last for several generations. In places like Hamugu Village these two- or three-story lodges are built with timber from the mountaintops that is pulled downhill by bulls, often one trunk at a time.

If you are traveling through Yunnan there is a good chance you will end up in Shangri-la, especially if a hike through Tiger Leaping Gorge is in your itinerary. Find a hostel, hire a driver, go exploring and support the local economy. As long as there is a steady supply of culturally sensitive backpackers, Shangri-la won't need to turn into another Disney World.