I've written a bit about this phenomena in Taiwan before for weddings.
This is the first I've seen anything about this in China. According to the article:
"the more people that come to a funeral in China, the better the deceased is likely to fare in the afterlife, which is why some families have taken to hiring exotic dancers to keep attendance figures high"
It's funny, I'd never thought about this as a plausible reason for having the dancers. You learn a new thing every day...
Asian Sex Gazette - Exotic dancers banned from performing at funerals in China - China Sex News
Don't ask me why I was reading the Asian Sex Gazette (although I do highly recommend it).