Chinese paper lanterns are great ways to enhance your party, and they are simple to create with what you have in the house.
Almost any paper can be utilized, but it should be able to hold up to creasing and cutting (so no tissue paper). Construction paper is easy to get and works great.
Take a sheet of your paper and fold it in half to make a long rectangle. Run your fingers on the crease hard.
Now take scissors and make several small cuts along the edge on the side with the fold. You’re basically making a fringe on the side of the paper that you made the thick crease on. Leave about an inch and a half to an inch at the top uncut!
Now unfold the paper and wrap the sheet into a cylinder shape where the “fringe” you just cut is now in the center of the lantern. Glue or tape the edges down.
Add a handle to the top using a spare strip of paper. Make several lanterns and then string them together and hang. Enjoy!

For more info on decorating, you should check out this article on oriental decor.