Where did the ancient chinese believe spirits dwell?

Either reincarnated or lived with the gods.

Explanation:

Ancient Chinese had two dominant belief systems, or religions. One were Buddhists and other were Confucians. Buddhists believed that people were reincarnated if they reached to the other side. On the other side, Confucians believed that their ancestors dwelt with the gods and could be prayed to for assistance or protection. In the meantime they were in a sort of a purgatory where their soul needed to cross a bridge to the afterlife.