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The Chinese celebrate two "Festivals of the Dead". One is Ching Ming, the time for remembering your ancestors. This is when Chinese families will visit the graves of its relatives and ancestors. The second one is Da Jui, or commonly known as The Hungry Ghost Festival, which occurs on the fifteenth day of the seventh lunar month.
Da Jui seeks to pacify the ghosts of strangers, the lonely, the wondering and the uncared for. According to the Chinese mythology, the gates of hell will open in the seventh lunar month. Spirits and ghosts are allowed to roam the earth and find the comfort they desire. Chinese street operas (wayang) will be staged to entertain these "guests". It is believed that the front rows of seats would be taken up by the spirits and ghosts and so they would be left vacant.
The seventh lunar month is considered the most dangerous month of the year. It is during this time that the souls of the loved ones live close to the alive. The souls can take up different forms, appearing as snakes, moths, birds, foxes, wolves, tigers and so on. They can appear as beautiful men or women to seduce the living. They can possess an individual by entering the body and cause illness and mental disorders. Ancestral spirits that are well fed and well cared for will bring good fortune.
Souls of those who died on their own, like in accidents such as drowning or even suicides, are denied entry into heaven. These souls search for other souls, even the innocent ones, to fill up their posts in hell. Special attention will also be given to the "hungry ghosts" and the "lonely ghosts," they have no living descendants can easily get bad-tempered and destructive during their "vacation" back to Earth.
To prevent them from doing any harm to the living or the dead, the Chinese would use lanterns to distract them away, or make sacrifices and burn "hell notes" or "paper replicas" for them to use in the underworld, in a safe place outside their homes (to prevent them from coming in) to "bribe" these disturbed souls.

So you can tell that not only ghosts, even humans will benefit from this "vacation". They are of course the paper-mache craftsmen. They fashion complete wardrobes, cars, airplanes, furniture, money and other necessities of life, out of paper, and these folk art forms are burned as offerings. This act of offerings gifts to the ghosts by burning such paper replicas generally
takes place on the pavements and is quiet a colourful scene.
Everyone is constantly on the lookout for ghosts, as they can take on human form at will during this time. One way to spot a ghost is to look at their feet, because it is believed that their feet never touch the ground.
In the Republic of China during the late summer, swimming pools and beaches are empty, the roads are uncrowded and no one seems to want to go outdoors after sunset. Weddings have been postponed and important business deals have been re-scheduled. An aura of fear and caution has engulfed the entire country.
Why is this so?
Because the gates of Hell were opened back on August 3 and for an entire month, countless of souls are back to roam the Earth. It is the "Ghost Month" again and every living souls in the country is taking it very seriously. It is an awkward family reunion, as deceased relatives come home, demanding attention and care from those alive.
What is the Chung Yuan Festival?
Found in the middle of the "Ghost Month", it is one of the most auspicious day. Huge spreads are set out in the temple courtyards, common corridors and even at homes. Overflowing with sacrificial offerings of meat, fish, vegetables, canned foods and alcoholic beverages.
Tall bamboo poles with hanging lanterns are erected at the temple gates to guide the ghosts to the banquets inside, and Chinese operas are performed non-stop to entertain the ghosts while they "dine." After the banquet is complete, the temples are filled with "tou teng" which are containers filled with rice and topped with symbolic evil-dispelling objects like knives, umbrellas and mirrors.
How did the Ghost Month come about?
It is still a mystery. Taoists believe that the month honors the birthday of Yenlo Wang, the Demon King. Buddhists believe a legend about a man named Mu Lan who travelled to Hades to visit his recently deceased mother. She was evil and selfish on Earth, and when Mu Lan arrived he found her hungry and tormented. He tried to feed her, but the food turned to ashes every time it touches her lips. When he returned to Earth, Mu Lan asked his Buddhist master if his mom could be saved. The monk replied that she could only achieve salvation if, Mu Lan could prepare food and drink offerings for all lost souls, and if all the monks and nuns chant and pray for her.