The Penglaiese Empire developed from the Hsien revolution. The Hsien had early taken a critical view of the Federation, and instead saw humanity's future in Penglai and Neotaoism. Buoyed by popular support, the Hsien encouraged cladisation, independence and interstellar expansion. They deliberately allied themselves with some megacorporations and became part of the NoCoZo treaty in 1676, while at the same time they opposed the Federation and more Federation loyal megacorps.
The term "the Penglaiese Empire" is a misnomer, since it was never an unified political group. It was generally called the "Penglai Evolution" during its ascendancy. The Hsien realised that it was hard or impossible to truly govern an interstellar alliance in any centralised way, learning from the failures of the Federation and Eridanus League. Instead they sought to create an unified culture, a philosophy of life and government that could spread across space and retain its character despite vast distances and human cladisation. This vision was realised to a much fuller extent by the Conver Ambi centuries later, but the origin of memetically maintained interstellar polities is definitely the political science of the Hsien.
The Penglai Evolution swept across a number of neighbouring worlds, as large numbers of colonists moved out-system to explore the Way. The local Hsien governments often cooperated intimately with megacorps in developing the systems, often to the extent of blurring the lines between corporation and government. For example the AC+65 6955 colony Sulphur Blossom merged with SecureSpace to become a subsidiary, which later went on to influence the corporate culture to a large extent with neotaoist libertarian ideas. The fact that the colony had ceased to be a political entity did not worry the Penglai Hsien, who instead considered the whole event a success - "the true masters go with the flow, and allow their profound wisdom to vitalise everything", as the then current Monkey King commented.
Ironically, what many megacorps learned best from the Penglaiese was Confucian Capitalism. As the Hsien spread and cladised, the radicals more and more left Penglai's surface. The political and economical influence moved into orbit, leaving the conservatives behind on the planet. Instead looking towards tradition and stability, they forged a number of deals on their own with more Federation-oriented megacorps. Especially Birnam Ecotech and Tokera SpaceLiners dealt with the conservatives on Penglai, seeing it both as a vast market in itself and a way of getting into the NoCoZo market through a back door. The Hsien could not prevent it due to their own economic non-intervention rules they had set up to protect the independence of the orbital habitats, although they often did what they could to complicate things.
As the Penglaiese Evolution continued, the lack of central control and extreme cladisation began to take its toll. The ideological purity of many societies wavered, various pirate or rouge groups emerged, memetic infiltration from other forces and economic ties to increasingly divergent megacorps dissolved the ties back to the motherworld. While the Penglai Hsien still claimed their goal was not interstellar rulership, it was clear that they were losing influence over the Evolution. As the Federation crumbled and the emerging stargates transformed the nature of interstellar governance, the Penglaiese worlds simply ceased to be related.
The formal end of the Penglaiese Evolution came in the Shi War 2220-2251. The conservative surface governments of Penglai had gained powerful allies in the Conver Ambi, while the orbital Hsien were weakened and divided into a myriad of divergent factions. In 2210 the planetary governments were unified by a secret pact, and began to work together with their offworld allies to depose the Hsien. They began a massive campaign of deliberate mystification and other memetic tools to enhance the feeling that Penglai itself was the one stable and true home to the Penglaiese clades. They even set up a "shadow emperor", a virtual persona that did not exist but was made the focus of intense rumours of an imminent rebirth of the Penglaiese Empire, this time as a true empire. The whole stratagem created uncertainty and confusion among the orbitals, as well as a growing nationalism among many moderates.
In 2251 everything was ready, and in a fast and bloodless coup they seized control over all strategic systems in Penglai orbit as well as the Interstellar Cyclers and the newly established Sigma Draconis - Tau-Ceti stargate. The Hsien and their NoCoZo allies realised they could not take the system without extreme destruction, and in a peace deal negotiated by hyperturings on both sides a settlement was reached. The Hsien retreated to other NoCoZo worlds, and the Reborn Penglaiese Empire came to rule the Sigma Draconis system. Formally independent, it quickly became a totally dependent part of the Conver Ambi.
The lasting effects of the Penglaiese Evolution were profound. The influence of Penglaiese Hsien thought on NoCoZo libertarianism has been extensive, and it is safe to say that without the unifying if largely unplanned impact of the sizeable Penglaiese population on the emerging NoCoZo the alliance would not have coalesced into any stable form. While the Penglaiese Empire eventually dissolved into independent worlds, its ideas about economic wu-wei and independence carried on. In the same way the most ambitious and mystical forms of Transhumanism in Penglaiese thought were deeply influential in the formation of Keterist thinking. It is no accident that cut-down copies of Metraton circulated in the Penglaiese Nets in the 3800's, or that the people of Lam Wai-Chun (Chi Draconis A-V) in the 4450 general elections chose to join the Keter dominion and later came to collectively ascend in the 5300's.