There are many stories on how this festival was created. One other story is about a maid. In the Han Dynasty, Mr. Eastern was a favorite advisor of the emperor. One winter day, he went to the garden and heard a little girl crying and getting ready to jump into a well to commit suicide. Mr. Eastern stopped her and asked why. She said she was a maid in the emperor's palace and her name was Yuan-Xiao.
She never had the chance to meet her family after she started worked at the palace. She missed them so much every 12th lunar month. If she couldn't have the chance to show her filial piety in this life, she would rather die. Mr. Eastern promised her to find a way so she could reunion with her family. Mr. Eastern left the palace and set up a fortune-telling stall on the street and disguised himself as a fortuneteller. Because of his reputation, many people asked for their fortunes.
But every one got the same prediction - a severe fire accident on the 15th lunar day. The rumor spread quickly. Everyone was worried about the future and asked Mr. Eastern for help. Mr. Eastern said, "On the 13th lunar day, the God of Fire will send a fairy lady in red to burn down the city. If you see a lady in red wearing green pants riding a black horse on that day, you should ask for her mercy." On that day, Yuan-Xiao pretended to be the red fairy lady. When people asked for her help, she said, "I'm the messenger of the God of Fire and came to check on the city and I'm going to set up fire on 15th. This is an order from Jade Emperor. He will watch from the heavens."I will give you a copy of the imperial decree from the God of Fire. You should go to ask your emperor to find a way out."
After she left, people went to the palace to show the emperor the decree which reads "The capital city is in trouble. Fire burns on the palace, and fire from Heaven burns all night long on the 15th." The emperor of Han Dynasty was very shocked. He called and asked Mr. Eastern for advice. After pondering for a while, Mr. Eastern said, "I heard that the God of Fire likes to eat Tang-Yuan (Sweet dumpling). Does Yuan-Xiao often cook Tang-Yuan for you? On the 15th lunar day, let Yuan-Xiao make Tang-Yuan. Your Majesty will take charge of the worshipping ceremony and you will give an order to every house to prepare Tang-Yuan to worship the God of Fire at the same time. Also, deliver another order to ask every house in the city to hang red lantern and explode fire crackers. Lastly, everyone in the palace and people outside the city should carry their lanterns on the street to watch the lantern decoration and fireworks. If everything goes this way, the Jade Emperor would be deceived.Then everyone can avoid the fire accident."
The emperor happily followed the plan. Lanterns were everywhere in the capital city on the night of the 15th lunar day. People were walking on the street. Fire crackers kept making lots of noise. It looked like the entire city was on fire. Yuan-Xiao's parents went into the palace to watch the lantern decorations, and Yuan-Xiao made a big lantern and wrote her name on the lantern. They happily reunited together after her parents called her name. Everybody was safe during the night. The emperor of Han Dynasty had a new order that people should do the same thing every year. Since Yuan-Xiao cooked the best Tan-Yuan, people called the day Yuan-Xiao Festival.