This article examines the dynamic interactions between the people of the plains and the people in the highlands as they respond to dramatic economic transformations in Menghai county in Yunnan's southern Xishuangbanna prefecture. In particular, it focuses on the encounters between Han tea merchants, Dai intermediaries and upland ethnic minorities by examining the Pu'er tea trade. The structural relationship between the non-local Han, and the local highland dwellers and lowland Dai changes as the brisk tea market climbs into the mountains. The author argues that the commercial interactions among the three groups are complex, hierarchical and dynamic. Their encounters with the modern tea market have reshaped internal and external ethnic relations in Menghai, Xishuangbanna. Simultaneously, there is an increasing sense of pride in their mountainous homeland among the highland ethnic minorities.