An ancient Chinese legend tells of a man-eating predatory beast called Nian, extremely fierce, with a long head and sharp horn. Nian dwelled deep in the sea the whole year long, but on every Chinese New Year eve it would climb onto the shore to devour livestock and harm humans in a near-by village. Therefore, every Chinese New Year's Eve, all the villagers would take their old and young deep into the mountains to hide from Nian.

One Chinese New Year's Eve a grey haired man appeared in the village. He asked permission to stay for the night and assured everyone that he would chase away the beast. No one believed him. In addition, the old man steadfastly refused to go to the mountains to hide. Seeing that he could not be persuaded, the villagers departed without him.

When the beast arrived at the village to wreck havoc as usual, it was met with a sudden burst of exploding firecrackers. Startled by the noise, the flashes of light and red banners flying about, it hastily turned and fled!

The following day, as the people returned from the mountains, they found the village intact and safe. The old man had left, but they found the remains of the three precious items he had used to chase the beast Nian away. They all agreed that the old man must be a deity who had come to help free them of the beast.

From then on, every Chinese New Year's Eve, families would hang red banners, set off fire crackers, and light their lamps the whole night through, awaiting the Chinese New Year. The custom spread far and wide and became a grand traditional celebration of the "Passing of Nian" ("Nian" in Chinese means "year"). So celebrating the Chinese New Year should be called "passing of Nian" or "Guo Nian" in Chinese.