Question: The term is [妖精](https://zh.wikipedia.org/wiki/%E5%A6%96%E7%B2%BE), which can be translated into English as "fairy", "elf", "goblin". As noted, the Japanese literature uses 妖精 to describe the European fairy. The English translation of 白骨精 in 西游记 (Journey to the West) is "white bone demon". So, this word can be translated into English as fairy, elf, goblin, or demon. 

Let's say an author is writing a fantasy story in Chinese first, using terms that are understood in a Chinese society. Then, the same author translates his/her own story into English and faces a problem. Which term should 妖精 be translated into (fairy, elf, goblin, or demon)? Or are the differences between the terms negligible, so the author can just pick a random one and go with it?

Answer: 
In your example, 白骨精, I'd say the 精 is not so much 'fairy' as it is in 妖精, but rather 'spirit' (like in 精霊), similar to how in English we can use the word 'spirit' to describe a lot of different types of ghouls and ghosts, so spirit might be a good choice as a kind of 'all round' title. 

Anyway, I don't have a definite answer, but I would say there's two options.

Option one, rather than translating the other language into an English equivalent you could simply use the foreign word. For example, a 僵尸 would simply be 'jiangshi', rather than 'Chinese hopping vampire'. This would work best if what you're writing is set in a world or country that comes across as foreign to English readers anyway, whether you use English to describe the creatures or not. After all, most people are unfamiliar with foreign mythical creatures, so in some cases the English may give no more of an idea of what the creature is like than the original foreign word. 

But then for option two (which is the one I'd use), to be honest I would just say to choose which word (ghoul, fairy, spirit, demon) fits with the image of the creature. Is it small and cute and not very mean? Fairy or spirit should do. Is it ugly and bad, but maybe not so deadly to humans? Maybe ghoul would work. Evil and malevolent and otherwise hurts people? Demon or devil it is.

When it comes to writing the author has a lot of leeway with naming and making up creatures, so I would go with whatever you feel fits the best, whether that be the English or the original word.
To a native American English speaker, *fairy* and *elf* will both connote a positive or helpful mythological creature that may wield magic. *Goblin* will connote a trouble maker, and *demon* will connote a denizen of hell. That may, perhaps, guide your choice. 

In wiktionary, 妖精 leans more toward *fairy* than *goblin*. I'd suggest calling them fay-like creatures, or perhaps Japanese fairies. Something like this so the reader knows not to envision typical fairies. White bone demon is an interesting idea and if you decide to do that you will definitely be communicating something non-traditional.