After my grandmother passed away, my aunt went to a temple and burned fake money.
My mom says that it is a Chinese tradition to burn fake money, small paper houses, cars, etc. because it is a way to pass it on to the deceased relative so he/she can use it in their new world. My mom learned about this custom when she was young, through observation at other peoples funerals she attended and her mother explained this custom to her.
This paper burning folk ritual, known as paper offerings, shows the Chinese peoples filial piety – their dedication to their ancestors and family. Although their relatives are no longer present in the world, the family still wishes for their deceased relatives to be well taken care of in the next world. Paper offerings for the dead relatives are a way for the remaining family to show their love and concern for their ancestors.
This paper burning offerings is documented in For Gods, Ghosts and Ancestors: The Chinese Tradition of Paper Offerings by Janet Lee Scott. From Scotts research, she has gathered that mourners provide gifts to the dead in order to maintain the ties between the dead and the living. Moreover, the offerings to departed kinsmen are a most significant part of both the funeral ritual and the rituals of commemoration, for the dead are dependents after death, needing the family to supply what they require (104). The Chinese cannot just use any ordinary piece of plain paper for the offerings. The special papers, which can be considered as folk objects, can be homemade if one knows the trade, but if not, they can be bought at certain paper shops. Traditional papermaking in China involved a long series of labor intensive steps, such as hand making the paper and embossing them with thin sheets of gold or silver. Cutting and assembling may also me required (160). These special paper offerings are not only used for the deceased, they are also use for luck, protection, and honoring the gods.
Scott, Janet Lee. For Gods, Ghosts and Ancestors: The Chinese Tradition of Paper Offerings. Hong Kong: Hong Kong University Press, 2007.