If you've never done a Chinese auction before, Zen explains how it works:
All the gifts are collected and placed on a table. Each participant draws a number.
#1 selects a gift from the table, unwraps it and shows it to everyone.
#2 can either select a gift from the table, unwrap it and show it to everyone OR take #1's gift and #1 selects a new gift and unwraps it.
#3 can select a new gift OR take #1's or #2's . . . etc., etc., etc.
Gifts are "dead" when they are take by the third person. The third person to "own" the gift gets to keep it till the end of the game. After the last person's turn is finished, the final selection goes back to #1. #1 has the choice to keep the gift they are holding OR trade with anyone in the room, including all "dead" gifts.