The train left Kunming at 11:05 am on a 2,760-km trip to Beijing, which takes about 13 hours.
The train's name highlights the world famous resort in Shangri-la of Yunnan, a name first appearing in British novelist James Hilton's "Lost Horizon."
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The line is also thelongesteast-west high-speed railway in China.
A longer rail line stretching north to south is the 2,298-km Beijing-Guangzhou line, put into operation in 2012.
China has built more than 20,000 km of high-speed rail lines.
According to the government's plan, the mileage will increase to 45,000 km by 2030.
The launch of the Shanghai-Kunming line means the country's high-speed rail grid has taken shape, connecting almost all provinces on the Chinese mainland.
China is also aggressively marketing its bullettraintechnology in different countries including India effectively competing with Japan.
China will build more bullettrainnetwork as part of its efforts to establish a comprehensive transport system by 2020 an official white paper issued today said.
The white paper, titled Development of China's Transport, said China will increase the length of high-speed railways in service to 30,000 kms from the present 20000 kms by 2020 linking more than 80 per cent of its big cities.
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