In 2001, Pan Xiulong, the owner of a small guesthouse in the Old Town of Lijiang in Yunnan province, had a group of guests from Beijing come to stay. One of the visitors was Cui Jian, the godfather of Chinese rock 'n' roll.

Over beers and local food, Pan had a long chat with Cui. The musician was impressed with the natural scenery of the Yulong Snow Mountain and Lijiang, saying that "it would be great to have an outdoor music festival here". Pan agreed.

A year later, the first Snow Mountain Music Festival took place on Yulong Snow Mountain. At an elevation of more than 3,000 meters, over 20 Chinese rock acts, including Cui, Dou Wei and Second Hand Rose, performed over two days for nearly 10,000 music-lovers who traveled from all over the country for the event.