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Bear in mind, I have never seen this movie, so I can only explain this in terms of the TV series that I saw.
From the 1986 series, the girl is the daughter of Granny Golden Flower, who is actually the disguised Purple Dragon King (they don't use the term queen), the foremost of the Ming Sect's 4 Guardians. GGF is a decendant of the Persian branch of the Ming sect, but came to China and lived with the Chinese Ming sect leader as an adopted daughter; however, when she fell in love with a man who was not a member of the Ming sect, she broke away from the Mings. She was also wanted in Persia by her own sect, as she was supposed to remain a Holy girl (don't blame me for these terms) and for the crime of losing her virginity, she was to be executed. So she and her husband fled and she adopted a disguise and a new identity (although for some reason, it did not seem to be a secret from the chinese Ming sect members), and to protect their secret, she gave her daughter to another couple to raise in secret and stayed away from her daughter, visiting her every two years or so.
The daughter never intended to reveal her identity to anyone, content to serve the main character as a maid/servant. However, after a run-in with members of the Persian branch, she and her mother are forced to reveal their true identities in order to save some of the main characters, and in doing so, she also agrees to go back to Persia to be the new Sect leader of the Persian branch, an action that also seems to exonerate her mother's crime.
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