The expansion of the Liao dynasty in the 10th century eventually necessitated some sort of administrative division. During the reign of the first Liao emperor Taizu, he informally divided his lands into a northern region and a southern region; the third emperor, Shizong, formalized this arrangement in 947. The northern section was mostly (but not entirely) inhabited by the Khitan and other nomadic tribes, while the southern half was largely inhabited by sedentary peoples, such as Han Chinese and Po-hai. Each region had its own capital and its own system of law. The northern region was originally governed mostly through a traditional Khitan system of tribal government, but a second system was set in place that dealt with sedentary people living within its borders. The government of the southern region, in contrast, adopted many Chinese institutions and legal systems.