While the story doesn't specify a precise location, it is clear that the village is situated in a rural area surrounded by nature. This is evident from descriptions of:
* The calabash plants: These grow in a field outside the village.
* The mountain: The village is near a mountain where the demon lives.
* The river: The village is near a river where the children encounter the demon.
The story's focus on the traditional Chinese folklore and its use of traditional Chinese language elements further reinforces the setting as a village in ancient China.