Gleaming gold watches and smartphones are piled high in a ramshackle Chinese farmhouse -- all replicas made of paper and designed to be incinerated, as 21st-century consumerism transforms the age-old market in offerings to ancestors.

"Our work is serving the dead," said Pu Shuzhen, as female workers with glue guns folded paper into imitations of Louis Vuitton handbags and iPhones in her dirt-floored house turned workshop.

China celebrates "Tomb Sweeping Festival" on Sunday, when millions burn paper offerings to their ancestors in a tradition believed to date back thousands of years.

Pu's workshop is one of hundreds hidden inside crumbling courtyards in Hebei, a province bordering Beijing which local farmers have transformed into the centre of the country's funeral products industry.

"Before we were growing corn and potatoes. It was tough," Pu said. "The money from this is better than farming."

Mahjong tables, jewel boxes and cigarettes sell well, she said. Other items include imitation house ownership certificates and more practical goods such as toothpaste, toothbrushes and shoes.

"They are just the same as living people use," she said. "It was like that in ancient times too. It's a tradition handed down from our ancestors."

Offerings to the dead have been found at some of China's oldest grave sites.

"The products express an emotion: we are living well, and we hope our ancestors can live just as well in their world," said factory owner Zhang Guilai, as a vast press roared in the background pressing out paper houses.

- Grave issues -

Beijing declared tomb sweeping festival -- just one of many traditional dates for honouring ancestors -- a national holiday in 2007.

The move was a marked contrast to Mao Zedong's rule when the officially atheist Communist party condemned tomb offerings as feudal, graves were desecrated and traditions driven underground.

"During Mao Zedong's time it was all about opposing superstition... and we would have to give offerings in secret," said Pu's husband, Zhao Yansheng. "But now it's a national holiday... and we can celebrate openly."

Even so, official attitudes are still sometimes ambivalent.

China's civil affairs ministry this year vowed on its website to step up controls on "burning paper money, offerings and other uncivilised tomb sweeping behaviour", while also "preventing the use of vulgar and superstitious grave offerings".

State media have also blamed burnt offerings for adding to chronic air pollution.

The ministry did not define what it considered "vulgar" and did not respond to a request for comment from AFP.

But at an open air market on a mud-soaked road in Mijiawu, vendors displayed paper Ferraris and female mistresses.

Officials in the northern city of Changchun -- which hands out fines for burning offerings in public places -- last month confiscated seven vehicle-loads of "feudal and superstitious objects", including paper cattle and horses, reports said.

"It's clear to see that people are adding commercial elements -- such as paper houses, sports cars and mistresses -- into these traditions, and some people would consider that vulgar," Yang Genlai, an academic affiliated with the civil affairs ministry told AFP.

He added: "Personally I think any kind of object which can express respect towards ancestors can be reasonable. Burning iPhones is a reflection of how things are today."

- Cashing in -

Authorities have other reasons to be suspicious of paper offerings.

At the Mijiawu market, seller Meng Weikai said: "Everything that living people have, there are paper replicas to be burned.

"In the past, you just burned some plain white paper. Now we burn notes which look more and more like real money, we even have US dollars."

But they are sometimes misused for earthly purposes. Police in southern China reportedly held four people in February for attempting to pay back a loan with "spirit money", and in January police in Hebei arrested a suspect who had used such bills to buy lottery tickets worth 90,000 yuan.

Workers at one small imitation money workshop ushered AFP reporters away as fresh red notes lay drying on rusty metal printing presses.

"It is hard for ordinary people to tell the 'spirit money' apart from real money... this money has seriously damaged the image of the renminbi," the state-run Xianyang Daily cited a banking official as saying last year.

At the Sanyuancun market in Beijing bundles of cash sell for three to five yuan ($0.5-$0.8) apiece. "People want to tell the ancestors that the family still has descendants," said vendor Liu Li.

"This is a 50 billion yuan note, this one is 10 million," she added. "The afterlife has inflation as well, that's why you have to burn big denominations. I've also got foreign notes here -- the dead need to go abroad too."