Liang is introduced to us at Level 20, during the Pearls of Wisdo quest. We must claim the land under his hot air balloon landing pad, and then we can accept and fill orders for him. His orders usually start out fairly reasonable, but I have to admit that over time, they grow to be pretty crazy. Still, this is no reason not to deal with him!
It is, however, an excellent reason to make sure you are part of an active and helpful Alliance. You'll find that it's just about impossible to fill all of his requests, but for those that are a bit of a reach (i.e. more than you could possibly do by yourself, but not ridiculous), the help of an alliance is invaluable.
Liang pays you in XP, Royal Coin and Pearls, which is why he's called the Dragon Merchant - pearls are used to purchase Dragon Heroes (among other types). The XP and coin you get each time you fill any part of his order (there are six parts to his order to begin with, though that grows over time as well). The pearls you only get when you complete an entire order, and within the given time limit (16 hours from when you first login after he lands). For more information about pearls and the heroes they can purchase, visit the pearls page.
Quests given by Liang: