Emperor Shengzong of Liao, also known as Yelu Longxu, succeeded Emperor Jinzong as Emperor of the Khitan at the age of 12. As he was too young to actually rule, his mother effectively ruled the kingdom. His mother, Empress Xiao , appointed Yelu Xiuge as her senior general and launched a war on the Song army in 987. In 1005, the Song bought peace by offering 200,000 bolts of silk and 100,000 ounces of silver each year. This was established in the Shanyuan Treaty . In 1009, after the Korean King was deposed, Shengzong invaded Korea with 400,000 men, and burned the Korean capital at Kaekyong . Shengzong demanded territory but in the end, Korea gained a favorable settlement in 1019. Emperor Shengzong eventually died in the year 1031.

During the rule of Emperor Shengzong, the Liao instituted feudal reform, spurring it's economy. Prior to this, it had depended on territorial expansion, slavery, and thievery. Under Shengzong's rule, most slaves were liberated, becoming normal members of society. The most important parts of the economy from then on were horse raising, sheep raising, agriculture, and fishing. Shengzong was also the one to institutionalize state examinations for the election of Chinese officials.